My flamboyant set of shoes proves money can be the best Christmas present of all: Sarah Coles

Academics being academics, they have subsequently had a 30-year argument about it, with the upshot being that if you buy the perfect gift, the value of the present is worth more than the money. It means that if you’re incredibly close to someone, and understand their wishes and needs as well as they do themselves, you should get them the present they most want. For your other presents, cash may be a better bet.

Some people will opt for the halfway house of vouchers or gift cards, but this isn’t always a brilliant idea. If you don’t know them well enough, you could accidentally buy for a shop they’re not interested in. Even if you know their favourite shops, recent history has shown that even the high street stalwarts aren’t immune to financial troubles, so they may go under before they have a chance to spend their gift card. Lots of the big brands that folded accepted them for a while, but there are never any guarantees.

Even if the company thrives, there’s the risk the gift card lies unspent in a drawer. It’s easy to lose track of when it expires, so by the time you come to use it, it’s worthless. A study showed that during the Coronavirus lockdowns, £100 million of unused gift vouchers expired.

There are all sorts of reasons why people worry about giving money as a gift. Some think it doesn’t send the right message about their relationship, because it feels a bit impersonal. It’s probably not a good look between husbands and wives. However, if it’s a relative you don’t know brilliantly well, it’s worth considering the alternative. You might be considering shower gel or a candle. Both of those give off a clear message of ‘I don’t know you very well and this seems safe, which isn’t necessarily a better message than ‘I don’t know you very well, but I want you to be able to have what you want.’

Others are concerned that, at the moment, cash will be absorbed into everyday spending, so they won’t really get a gift at all. However, if someone is really short of money, having help covering their costs could be the one thing they really need. One way to broach this problem is to give them money and suggest they might want to treat themselves. It may give them an excuse to spend it on a night out, without trying to dictate what they do with their money.

If you’re giving cash to kids, there are some extra options. If they have their own savings account, you could pay it in for them, to encourage them to think of this as potential savings rather than money burning a hole in their pocket. If you want them to put the money aside for longer, and they have a Junior ISA, you should be able to pay directly into it. These will grow tax-free to the age of 18, when they will belong to the child. It’s a great way to keep a nest egg out of their clutches until they reach adult life.

If they’re aged 18-39 and saving for a first home, you could offer to give them money to put into their Lifetime ISA. This has the extra benefit of being supercharged by the government bonus, so the £100 becomes £125 – which even an economist is going to like. However, you’d need to give it to them, and it would be up to them what they did with it., so you’d need to be prepared to trust them to make whatever decision was right for them.

Money can make a far better Christmas gift than you think, but in all this there is an important caveat. An awful lot depends on the role money has played in your relationship in the past. Families are complicated, so there may be debts between family members, or an imbalance of wealth that could be highlighted by a cash gift. You may have very different approaches to money, and it may have been a sticking point in the past. If there’s any question over any of this, money may be too difficult a gift to give. You’re probably better off with a set of toiletries that nobody really wants than a festive family argument.

Festive debts

We’re getting to the stage in the run up to Christmas where money can start getting a bit tight. It means an awful lot of people are borrowing – with one in five people using a credit card and almost one in 10 making the most of buy-now-pay-later deals.

Unfortunately, going into debt for Christmas presents can get horribly expensive. Our research shows that more than half of us expect to pay off our borrowing within a month – so we don’t have to worry about interest, but almost two in five will take 1-6 months, and almost one in 20 will take more than six months – which means plenty of interest payments.

It means that even at this stage, it’s worth considering if you can cut costs instead. If you do need to borrow, think carefully about the most sensible way to do it. Try to steer clear of your overdraft, because with some banks charging around 40% it’s a horribly expensive option. You can track down a cheap credit card – or look for one with an interest-free period on purchases. However, if you borrow this way, you also need to make a plan for paying it off – so you don’t fall into the trap of paying the minimum for months – or even years – and racking up a fortune in interest.