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Young Families Only Think They Have a Handle on Holiday Spending

NEW YORK (TheStreet) -- Young families are just getting the hang of handling more mouths to feed, more living space to pay for and more health care expenses to factor into the household financial equation.

So how are they doing on a key pocketbook issue at this time of year -- building and creating a holiday spending budget?

Fairly well, but with some caveats, according to Chicago-based BMO Harris Bank, which offers some revealing data (and helpful tips) on how younger U.S. families are coping with the added financial expense of the Christmas season.

According to the bank, a healthy 85% of young mothers and fathers with children 10 or younger have a holiday budget in place.

That's largely the good news, and it is a healthy trend that young families recognize the need to frame their Thanksgiving-to-New Years Eve financial run with a workable budget.

But those budgets are only workable if young consumers stick to them, and that's why many of those budgets are already starting to take on water. 

"The holiday shopping season can be a particularly expensive time of year, and as parents open their wallets it's important that they shop within their means," says Chris McComish, director of retail banking at BMO Harris Bank. "It's encouraging to see that most have a budget in place, but sticking to it can be the hard part."

McComish says that if your December gets away from you financially, it's imperative that the mistake isn't repeated next month.

"If you do take on debt to pay for gifts, then make sure that January is a period of belt tightening and that you have a plan in place to pay it down early into the new year," he adds.

He and BMO Harris Bank offer some statistics young families on a Christmas budget should keep in mind:

  • Of the 85% of households that do have a holiday budget, 47% are deemed "flexible" by young heads of family.
  • 58% tell the bank they "make impulse purchases during the holiday season."
  • January's notorious 'holiday hangover" affects 37% of young households, who come to "regret" their spending in December.
  • 39% said they felt pressure from society to overspend during the holidays.

How can younger households turn the tide against overspending this month?

Look for discounts, and reduce gift costs by setting spending limits ahead of time -- then using cash or a debit card to pay for purchases.

If you do opt for using credit card, pay it off right away and avoid making only the minimal monthly payment.

Sure, it's tempting to spend too much during the run-up to the new year, especially for new families learning to cope with straining budgets. But the upside of keeping limits on spending during the holidays is big, and one that will keep paying dividends well into 2014.

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