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Young adults can be hit harder by gift obligations

Younger millennials and Gen Zers, who may be less financially secure and restricted by smaller savings, are contending with the extra financial pressures of attending big events and buying big gifts to take with them.

Jones, 25, and Ransome, 32, recently teamed up with Experian for a video series on financial health called In My Bag — where they chat about money and their personal financial strategies.

Ransome notes that spending money on milestone birthdays and weddings became more prevalent when she hit her thirties.

“I think even over 25 or 30 is like the year[s] where people want to ball out because I think that people have progressed in their careers a little bit,” she says, recounting a friend who traveled to Mexico five times in one year for his friends’ thirtieth birthdays.

“Young adults [are] in that stage where all your friends are getting married, and all your friends are having babies. It can be really expensive when you’re buying your fourth bridesmaid dress of the year,” says certified financial planner Akeiva Ellis.

Ellis says that young adults may be earning less income compared to their older peers and could be contending with debt from credit cards and student loans.

Young adults often grapple with other costly personal milestones, such as buying their first home or having their first child, says certified financial planner Jeanne Sutton.

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Don’t be pressured into making poor financial choices

Both Jones and Ransome, who discuss gift-giving around Christmas in the first episode of the In My Bag series, agree that sometimes your loved ones may add to spending expectations.

Social media can often exacerbate the feeling that you need to keep up with your peers and present yourself in a certain way.

“If you see everybody flexing on Christmas, these gifts that they got, it kind of steers you towards doing things that are out of character for views,” explains Jones, adding that she’s experienced that pressure as well with her large social media presence that includes over 2.4 million followers on TikTok and 600K subscribers on YouTube.

"It's crazy that I'm comparing my highlight reel to my actual life, you know? Why do you even have to share all of your gifts on social media? That's a little braggadocious.’"

This goes for throwing your own lavish birthday parties and wedding celebrations too. Sutton says it’s become a “sign of the times.”

“Once you commit and contribute to these large events for other people, when it's your turn … you want to do something just as awesome.”

Read more: Here's how much the average American 60-year-old holds in retirement savings — how does your nest egg compare?

Set healthy boundaries with loved ones

Don’t be afraid to be open and communicative about your financial situation and how much you’re willing to spend.

“[I have friends] who sat down, had a meeting and decided, ‘We're going to just do Secret Santa or we're going to do White Elephant’ … Each person gifts someone something and that way … not everyone is in trouble financially once January 1 rolls around,” Ransome says.

And weddings can also be particularly tricky because there’s a certain “protocol” for guests to follow, she adds.

Weddings are often incredibly expensive for the couples hosting them and etiquette generally dictates attendees spend around $100 on a gift.

Ransome was a bridesmaid for a wedding last year, but needed to travel from Los Angeles to the east coast for the bridal events. She chose to attend the bachelorette party, but skipped the bridal shower that occurred a couple months later.

“I said, ‘You know what, I just don't think that this is feasible right now for my finances, but I will be at the wedding’ … and the bride was very understanding.”

Jones agrees that it’s important to set boundaries. “If the people around you have these unfair expectations about how much money you're supposed to drop on them, I don't think you need to be around those folks.”

If you are asked to be part of the wedding party, that commitment comes with another set of costs.

Ellis says don’t be afraid to ask questions. If you’re invited as part of the bridal party, you can ask about the budget and what general expenses may be involved such as the cost of the bridesmaid dress or bachelorette party.

She says you have to be willing to “put your oxygen mask on first” when dealing with your finances.

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How much should you spend on gifts?

Sutton says before deciding how much you can spend on a big gift, be realistic about your budget.

“You should be saving 10%. Housing, and all the things associated with housing, is probably going to be 20 to 30% of your budget. You probably need 50% to live on. So you're going to have about 20% there to play with,” she explains. If you have substantial debt to pay down, then that’s going to subtract from how much you can spend on “extras”, such as gifts.

If your bank account is running low, there are ways to get creative without spending much money as well. Sutton gives the example of “gifting” two free nights of babysitting to expecting parents, and Ellis says one of the best gifts she’s ever received was a handmade card.

In debt? Don't despair

Lifestyle creep is real — and so is the debt that can come along with it. If you let your spending get a little out of control, there are ways to dig yourself out of that hole a little faster.

In February 2023 the average credit card interest rate in the U.S. is at 20.40%, according to The Federal Reserve.

Having multiple debts at high interest rates can be understandably nerve-wracking. Not only do you need to keep track of multiple payment cycles, you may have different minimum payments to handle.

Debt consolidation can offer much-needed relief in this situation. When you consolidate debts, you take out a new low-interest loan and use it to pay off all of your high-interest debt.

There are platforms that can match you with a personalized loan offer in minutes. By replacing your old loans with a single, better one, you can keep yourself organized as you work to pay it off.

You’ll also have the chance to set new terms. If you want to get out of debt sooner and save on interest, you can choose a shorter repayment plan.

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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.

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