Natasha Kovacs wants people to have meaningful experiences this holiday season. Experiences that you can’t necessarily find at the mall or online. And instead of forever falling off the bottom of Santa’s list (it’s not like you’ve been naughty!), she wants everyone to put themselves first.

And here’s where the meaningful holiday experiences come in. Kovacs, a Senior Financial Planner with TD Wealth, suggests that clients who have trouble managing money or those who simply want to get ahead financially write out their wishes for the holidays. Usually those wishes come down to spending time with family, ensuring loved ones are happy, and enjoying a good meal together: As Kovacs points out, this list rarely includes dollar signs.

It’s easy to get caught up in the internal and external pressures to spend during the holidays. After all, taking care of our families is the main financial goal for most of us. But if your spending comes at the cost of your own future, and maybe at the cost of your family’s security, Kovacs says that adjustments should be considered.

She tries to help her clients look at holiday spending more mindfully. Kovacs would like people to focus their spending on what’s significant for them to have a great holiday, and reconsider over-the-top lavishness. In the U.S. $171 billion worth of holiday merchandise gets returned to retailers every year.1 That’s a lot of holiday spending that misses its mark. Here’s a proposition to consider: Suppose this holiday season, you trade some of your holiday budget for better financial security.

The money would be rechanneled to someone who really, really deserves something special.

Yes — you’re so clever — it’s you.

Whether that sounds Scroogey or smart, could be a matter of perspective. Either way, here are some ideas on how you could gift yourself — and help your loved ones — by making some shrewd financial moves this winter.

Why financial security is the best gift ever

While many gifts can lose their lustre the moment the wrapping paper comes off, the power of compound interest means the value of a financial gift could literally grow for years — not to mention the tax incentives it may come with. Moreover, prioritizing your savings may enhance your quality of life. Buying boats and taking trips to Europe are the clichéd results of having wealth. But intangibles such as affording enhanced health care, retiring when you want to, or supporting charities that are dear to you — are also good measures of wealth. They can be strong incentives to save now.

Bargain hunters love a good sale. In the same way, your registered accounts may be a “bargain”.

“If you are in a 43% tax bracket,” says Kovacs, “and you put $1,000 in an Registered Retirement Savings Plan (RRSP), all things being equal, you’re going to lower your income and potentially receive $430 dollars back as a tax refund. So the true cost of your $1,000 investment was $570 out of your pocket, right?”

The same thinking goes into a Registered Education Savings Plan (RESP) which gives your beneficiary a $3,000 value for a $2,500 contribution once the maximum annual Canada Education Savings Grant (CESG) of $500 gets applied.

“If you’re trying to shop for holiday presents, you might be excited to get 15% off a premium toy but you can’t beat nearly 50% off,” she says.

Gifting yourself can support your family

Do you think gifting yourself this holiday season by contributing to your savings would make you feel guilty? Here’s a different perspective: Ensuring you are financially secure could allow you to better support family members, whether it’s helping a child with a first mortgage or supporting an elderly parent with paying enhanced healthcare costs.

Treat yourself to better finances

US$171 billion

Estimated value of holiday merchandise returned to U.S. retailers in 2022 (Source: National Retail Federation)

Recently, Kovacs helped a client put together a singular gift for her daughter, one that stands out in a tough economic environment of high costs and expensive home ownership. “Parents are concerned about the housing market but they want to gift their kids in a way that is efficient,” she says.

The client put an $8,000 gift towards her daughter’s initial First Home Savings Account (FHSA) contribution. Not only can an FHSA help young people save for a home, but the contributions will also be tax deductible for the account holder, and those tax return savings can be reinvested. Over the life of an FHSA (the federal government has set a maximum of 15 years) the investments can compound and represent a tidy sum when it comes to making a down payment on a first home.

Not rewarding yourself can bring you down

There is interesting research about the implications of not getting what we think we deserve: Behavioural studies have suggested that working hard and providing for others, but not receiving sufficient rewards back, can be demotivating. It’s the “effort-reward imbalance.”2

If you are stressing about trying to make everyone happy as you schlep through the malls and stay up late to roast a turkey, but never get rewarded yourself, you may want to fix your own effort-reward imbalance.

Kovacs says while the holidays can bring a blend of high emotion and higher expenditure, everyone should think proactively about their spending. Being mindful of the impact a gift makes (great or none), and who it goes to, is a step you can take towards lowering the stress related to holiday giving. “Proactivity is a gift you can give yourself because that’s what’s going to move you forward.”

“Think about what makes sense when you are considering where your hard-earned money goes,” Kovacs says. “Consider your holiday gifting, pause and maybe look at it a little differently. Ask yourself what’s going to give you the biggest bang for your buck.”

Here are some specific ideas to gift yourself financially this year.

Make a contribution to your RRSP, FHSA, or RESP

Most Canadians do not take full advantage of their registered accounts. In 2021, the median RRSP contribution was $3,890 and yet, under the rules, Canadians are generally permitted to contribute as much as 18% of their annual earned income. It is important to remember that registered products usually have tax advantages and, in the case of an RRSP, may involve a tax refund — last year the average refund was $2,093.3 Saving in a RRSP or other registered products allows you to potentially take advantage of the compound growth of your savings.

Pay down credit cards and other debt

Depending on your situation, it can be hard to improve your overall financial picture when you have lots of high-interest debt pulling you down. Directing your cash toward your needs (food, rent, transportation, etc.) remains a priority, but extra cash could be used first to knock down any high-interest rate debt (like credit cards) and then lower interest rate debt (like student loans). A chat with a financial planner or advisor can help you with a plan.

Make an extra mortgage payment

Paying off your mortgage as soon as possible could be the cornerstone of your overall financial plan. By putting some extra savings toward your mortgage each year, you could knock years off your term, depending on its length, the interest rate and principal owing. A good question to ask yourself might be: What would you do with that extra money when the mortgage is paid off?

Top up your TFSA

Few people maximize their TFSA contribution each year but topping up this registered account can bring several benefits. Unlike some registered accounts, you can make a tax-free withdrawal at any time for anything you want. And you can contribute to the fund as long as you live. Moreover, while there are tax implications if your heirs receive your RRSP, as the name says, your family can receive this money tax-free as beneficiaries.