Songs croon that the holiday season is the happiest time of the year, but for many, the holidays bring added stress.
That’s certainly the case among lower-income consumers, who may already be struggling to afford day-to-day expenses, let alone spend extra money on gifts.
Think Finance, a provider of payday loans and other financial services for so-called unbanked and underbanked consumers, recently surveyed 500 adults who earn less than $50,000 a year and use alternative financial services, about the added financial pressures of the holiday season.
More than half of those surveyed, about 56 percent, said they do not expect to have enough money set aside to cover holiday expenses, and 59 percent indicated that increased financial pressures at this time of year make them wish they could skip the holidays altogether.
“Many of us feel financial stress around the holidays, but for those who are already struggling, this can be a particularly difficult time of year,” said Ken Rees, CEO of Think Finance, in a press release.
One in Four Households 'Unbanked' or 'Underbanked'
The Federal Deposit Insurance Corp. estimates that one in four households fits into the description of “unbanked” or “underbanked,” which means they are either under-served or not served at all by banks in their community.
In the Think Finance survey, about 44 percent of those polled had used checking account overdraft protection at some point in the past 12 months. During the same period, 37 percent had used prepaid debit cards, 32 percent had used bank direct deposit advances, 28 percent had used money-transfer services, 23 percent had used check-cashing services, 16 percent used payday loans, and 9 percent used rent-to-own agreements.
Spending Less Than $500 on Gifts
To limit the financial blow that holiday gift-giving can cause, 77 percent of those surveyed said they would keep gift purchases to a minimum, spending $500 or less, and the same number said they will spend less on gifts than they spent last year.
This compares with a separate survey released by the retail industry trade group, the National Retail Federation, which found that Americans on average will spend about $719 on holiday gifts this year. (This broader group also would be spending less on gifts, but more on items for themselves, causing the NRF to estimate that holiday retail sales will rise 2.8 percent this year.)
It’s no wonder the lower-income group is spending less. More than a third of this group said they are barely getting by, and 39 percent said they are stretched but still managing to pay for necessities. More than three-quarters said they have cut back on overall spending due to the tough financial times of the last few years.
The group also is living paycheck to paycheck. About 46 percent said they would be able to cover expenses only for two weeks if they lost their source of income.