Getting the Best Return on Your Holiday Spending

Question of the week:I'd really like to cut back on holiday spending this year, but I still want to get the biggest bang for my buck. Any gift-giving suggestions for people like me? --Gene N. Dear Gene, It seems that many people are in your position this year. In fact, according to the results of a Gallup poll released a couple of weeks ago, Americans are planning on spending less this year on average--$769 each--than they have in the past three years. When we did our own informal poll of the Armchair Millionaire community, we found that most people are either planning on cutting back or staying about the same. Here are a few of the comments we received: "We're spending about the same. My two children will get one, maybe two, well chosen toys from Santa. We are starting some great family traditions that center on each other instead of things." --Cecelia KC "I'm cutting back. Spending about the same on the kids, but for friends, getting together for dinner and to spend time instead of money on gifts we don't need." --Kris "We are definitely simplifying. Kids getting a little less, and grownups are getting more thoughtful, less expensive things. The idea is not so much to save money (though that helps), but to try to preserve the meaning of the holiday." --CP With a little thought, you can come up with gifts that will more than make up for their lower cost by paying dividends down the road. My checklist has a few ideas to get you started thinking about gifts that will make a little cash go a long way. The Armchair Millionaire Checklist of Financially Savvy Gifts Personal finance software. There is no better way to help someone ramp up their financial life than to give them personal finance software. These programs (Quicken and Microsoft's Money are the two most popular) will help with investment tracking, retirement and college planning, budgeting, debt reduction and more. A bit of stock. This is a great time to buy stock, and you don't have to commit a lot of money to do it. Netstockdirect.com and buyandhold.com will both help you buy just a few shares, and oneshare.com will sell you a single share along with a framed stock certificate. A new mutual fund account. Opening a mutual fund account is perfect for a child. Several mutual fund companies, including Stein Roe, Liberty Funds and USAA, offer kid-friendly funds. These have low initial minimums and come with educational materials to help children learn about investing. U.S. savings bonds. If you're thinking about giving cash, consider a savings bond instead. They're safe, liquid and offer a predictable return. I especially like I-bonds, which will keep growing ahead of inflation. You can buy savings bonds from most banks or directly from the U.S. Treasury at www.treasurydirect.gov. Initial consultation with a financial advisor. We all can use a little outside perspective on our investments. Ask trusted colleagues or friends for referrals for fee-based advisors, who will charge you a flat hourly fee for a consultation. THE BOTTOM LINE: The latest battery-powered gizmo will probably be forgotten by March. To make your holiday dollars stretch as far as possible, think about gifts that will still be giving returns next year, and for many years after that.