(CNN) — Many parents will bust their budgets this year when it comes to fulfilling their children’s holiday wish lists, and that could mean they will be paying for those gifts for months, and sometimes years later.
More than half of parents report they aim to get everything on their kids’ wish lists this year, spending an average of $422 per child, according to a new survey from T. Rowe Price.
While creating a budget is a helpful way to avoid overspending, 58% of the parents said they never stick to it, and nearly two-thirds admit they spend more than they can afford.
“It’s OK to splurge a little bit on holiday spending. There is a lot of of pressure to do that, but we don’t want [parents] to go overboard at the expense of their financial well being,” said Marty Allenbaugh, a certified financial planner at T. Rowe Price.
The spending hangover some parents will face could last a lot longer than their New Year’s Eve partying. More than half will put their holiday spending tab on credit cards, with 61% planning to pay them off in three months and 16% will take more than six months.
One quarter of the parents surveyed have taken drastic measures to fund their purchases: 11% have dipped into their retirement account, 14% used funds from their emergency savings and 11% have taken out a payday loan.
While children might delight in their pile of presents, these decisions can have a long-term impact on parents’ financial security.
For instance, taking $500 out of a 401(k) at age 35 could mean sacrificing around $6,000 for retirement, according to Allenbaugh.
“There is a double financial whammy, [they] will pay additional taxes and penalties to access the money and there is also the opportunity cost,” he said.
Men are more likely than women to splurge during the holiday season, with 60% saying they will try to check off everything on their children’s want list.
There is some good news: 68% of parents said they have been saving for the blockbuster shopping season all year.
The survey was conducted in February and included more than 1,000 parents with kids ages 8 to 14.