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6 Holidays Gifts That Make Financial Sense

5. A communal dinner. This works best in a peer group of friends or co-workers, and can make financial sense for everyone involved. Rather than exchanging gifts you aren't sure people will want, plan a dinner where everyone is responsible for one aspect of the meal. Get together to prepare and eat that meal, and you'll find you've given each other something very valuable: each other's time.

6. Baked goods -- with a twist. Baked goods are a time-honored and cost-effective gift. But rather than giving them at the holidays when everyone is already overloaded with food, consider a twist like making your own "cookie of the month club" through which you give small batches of treats throughout the year.

A final caution on gift cards

Gift cards represent a $100 billion annual business, according to research firm CEB TowerGroup. The popularity is understandable. Gift cards are convenient for the giver, and more useful to the recipient than getting something they don't want. Perhaps the most significant thing gift cards have accomplished is they've made it socially acceptable to essentially give money as a gift no matter the nature of the relationship.

But for all their merits, gift cards are not without flaws. Although the 2009 CARD Act cleaned up some of the most onerous terms imposed upon gift card users, many still charge way too much. Gift cards can charge for buying the card, using the card, and for not using the card. Furthermore, people too often simply fail to use the full value of their cards -- an oversight that cost consumers about $2 billion in 2011 alone, according to CEB.

So if you decide to give a gift card, make sure it carries a minimal amount of fees and a distant expiration date. However, if you really want to resemble one of the wise men or women this holiday season, you'll at least consider the sensible alternatives listed above.

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