The holiday season centers on a tradition fraught with emotions, oftentimes conflicting ones: gift-giving.
How we decide what to spend on our loved ones involves a host of factors. How much money do they have or don’t have? What will our gift say about our own circumstances? How does this gift make us feel? And does this gift break traditional norms?
This swirl of emotions often can lead us to spend more than what we’ve set in our budget — as many surveys during this time of year typically show. So understanding what goes into our thinking as we shop for others and putting ourselves in our recipient’s shoes could help curb that urge to overspend.
How wealthy our loved one is can affect our gift choices in a variety of ways. Two studies show the differing responses we have.
In the first study conducted by Farnoush Reshadi and Julian Givi, it appears that we’re more apt to give friends who earn more than us higher-priced gifts than those who earn less. The researchers teased this out by asking a group of study participants to choose an amount for Amazon gift cards for either a real friend who makes more money or one who makes less.
On average, people chose to spend $59 on their wealthy friend, or about 30% more than the $46 they budgeted for their more underprivileged friend.
In the second part of the study, where participants could choose only between three gift card amounts —$20, $40, and $60 — the results were similar. Half chose the $60 gift card for their more affluent friends, versus a third who chose that amount for their poorer friends.
“Regardless of the giver’s wealth, we still found the same effect,” said Reshadi, an assistant professor at Worcester Polytechnic Institute’s business school.
When they dug into why the participants were more likely to give the gift card with the higher amount to richer friends, they found two underlying factors.
“At least partially, people behave this way because they wanted to impress their wealthy friend,” Reshadi said. “At the same time, this effect was partially driven because they just wanted to provide a good gift to this person and they thought that a wealthy friend has more expensive taste, so they would prefer a more expensive item.”
The gift-giving calculus changes somewhat when the gift amount literally takes away from the giver. In a separate study conducted by Max Alberhasky and Andrew Gershoff, study participants were offered to split up a $100 gift card, a certain amount of their choosing to go to themselves and the rest to a friend.
The result? Participants were more generous with their lesser-earning friends, splitting the $100 nearly 50-50. When it came to their higher-earning friends, they pocketed $65 to $70 for themselves and gifted between $30 and $35.
The reason behind the discrepancy was “situational sympathy where you realize you’re grateful for what you have and your friend might not be quite as fortunate,” said Alberhasky, an assistant professor of marketing at California State University Long Beach.
“And so that leads me to conclude that it might be OK to spend a little bit more on their gift than maybe I otherwise would.”
That situational sympathy disappeared, though, if the friends who earned less also worked fewer hours by choice rather than because of circumstance or didn’t work at all because they were living off a trust fund from their parents.
“If you remove the sympathy, then that should remove the desire to give more to those people,” said Gershoff, a professor of marketing at The University of Texas at Austin. “And sure enough, that’s exactly what we find.”
A woman carries shopping bags on a baby stroller as she walks through the mall in King of Prussia, Pa., Nov. 29, 2019. (REUTERS/Sarah Silbiger) ·REUTERS / Reuters
How we feel when we pick out gifts can play a big role in how much we spend as well. A second unpublished study that Reshadi and Givi are working on looks at how people focus on an item’s benefits rather than its price tag when buying it as a gift. If they were buying the item for themselves, cost is the more relevant factor.
“The reason why people are so focused on the benefits when buying gifts is because of what we call warm glow,” said Givi, an assistant professor of marketing at West Virginia University. “You’re just focusing on the fact that you’re going to put a smile on their face and that makes you feel good. You just ignore the cost.”
The duo also looked at how gift-giving norms dictate how people feel about giving digital gift cards. When asked, gift givers would much prefer to give a physical gift card rather than a digital one to maintain the old-fashioned tradition of exchanging gifts.
“You should come to the gift exchange with a box that you could hand me, and digital gift cards don’t really do that,” Givi said. “So gift givers are averse to giving them and it’s unfortunate because what we find is that recipients are more open to receiving them.”
A man dressed as Santa Claus poses with small children as people visit the American Dream Mall during Black Friday sales on Nov. 29, 2024, in East Rutherford City. (Photo by Kena Betancur/Getty Images) ·Kena Betancur via Getty Images
And that may be what ties these many studies together. The gift giver, whether subconsciously or not, is concerned with how they feel about the recipient or how they feel about the gift. There’s not a lot of focus on the actual recipient.
“If you’re overspending money on gifts and the recipient doesn’t even like it, it is going to be a huge waste of money,” said Reshadi.
Instead, shop from the perspective of a recipient, she suggested. Think about what you like to receive as a gift and use those insights to select gifts. Maybe a digital gift card isn’t so bad, after all. Or maybe save your gift-giving for another random time of year — a gift for no occasion at all.
“In one study, we found giving a $5 Amazon gift card out of the blue made people just as happy as giving a $50 Amazon gift card on their birthday,” Givi said.
Maybe it really is the thought that counts.
Janna Herron is a Senior Columnist at Yahoo Finance. Follow her on X @JannaHerron.
