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Stick to This 4-Gift Rule to Avoid Holiday Overspending

Updated November 7, 2024

Two girls grow excited as they open up Christmas presents.

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Those of us who have fond memories of opening stacks of presents under the tree on Christmas morning want to re-create that same magical feeling for our kids when the holidays roll around.

We want their eyes to grow wide when they see what’s waiting for them to unwrap. We want their hearts to burst with joy when they find they got just what they wanted.

What we don’t need, of course, is for our eyes to grow wide when checking our credit card statements and our hearts to sink with disappointment when realizing it’ll take months to pay down all the holiday debt.

Fortunately, the solution to keeping the kids happy without going overboard with your spending comes down to an easy gift-giving strategy called the four-gift rule.

More from The Penny Hoarder: 117 Places That Will Give You Free Stuff on Your Birthday

What Is the Four-Gift Rule?

The four-gift rule is super simple. It even rhymes, so it’s easy to remember.

You focus your holiday spending on just four things for each child:

Something they want
Something they need
Something to wear
Something to read

You buy one gift per category — that’s it.

This strategy sets clear boundaries on what types of gifts to get and caps how much you buy. It’s a great family tradition to adopt if you want to reduce the financial stress of the holiday season.

These tips for using the four-gift rule will help you stay within your holiday budget and avoid post-Christmas shopping regrets.

Something They Want

This is where you can make kids’ wishes come true. Go ahead and get the gift they circled in that catalog or saw on a TV commercial. It will be your shiny present with a bow on top, so make it count.

Just make sure to set a spending limit for this gift — whatever works best for your budget.

Using coupons and shopping sales can really help you score a gift from this category without spending hundreds of dollars.

Something They Need

You can get creative with this category and find something that you and your kids both agree they need.

This is a no-brainer if your kids play sports and their gear is getting a little worn. Maybe your children are shoe fanatics and would really appreciate a new pair. Or perhaps your little one loves playing dress-up and could use a nice jewelry box to store their many accessories.

See, there’s more to this category than just socks and underwear.

Something to Wear

But really though — socks and underwear. Do it.

Or go for something a little more exciting, like headphones, hats or headbands.

If you were under your budget on your shiny “want” gift, maybe you could package up an entire outfit.

Your kids may not have included any clothing items on their wish lists, so think hard about what would be exciting for them to get — like a shirt with their favorite cartoon character on it or a personalized piece of jewelry.

Something to Read

This one is quite easy if you save it for last and see what’s left in your budget. It can be as simple as a paperback, or as grand as an e-reader.

This gift category is a way to sneak in learning opportunities for your kids, but you can make it fun, too. Even if your children aren’t major bookworms, they might love a book based on their favorite TV show or a new movie that’s coming out. Graphic novels and comics count as books too!

Bonus: One Gift From Santa

If you’ve got room in your budget, don’t forget about jolly old St. Nick! You can opt for one Santa gift for the whole family — like a game — or get each kid one present from Santa that you know they’ll love. Look for small trinkets at the dollar store or somewhere similar to fill up the kids’ stockings.

By following the four-gift rule and sticking to one present from Santa, the meaning of giving goes a little further instead of letting Santa get all the credit.

Without being overwhelmed with a plethora of presents, the kids will be able to really focus their attention on the gifts they receive. The magic of Christmas will remain intact — without the extra financial stress.

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Meghan McAtasney is a freelance writer. Nicole Dow is a former senior writer at The Penny Hoarder. Deputy editor Tiffany Wendeln Connors updated this post.