The age-old maxim that "it's better to give that to receive" may be doubly true for some gifts.
With consumers curtailing spending amid high unemployment and sluggish economic growth, buying a pricey gift this holiday season may seem especially generous -- but could also end up being costly to the receiver. That $500 tablet or much-begged-for puppy can generate hundreds -- even thousands -- of dollars in bills for the folks who receive them. Even relatively inexpensive gifts can keep on taking. Consider the "tax and tip not included" fine print on many a daily deal site voucher, or the cumulative price of e-books for an inexpensive reader.
The problem is not new, of course, but tougher times put a greater onus on gift-buyers, says Jodi R.R. Smith, founder of etiquette consulting firm Mannersmith. "It's the sign of a thoughtful gift giver," she says. On a smaller level, that might mean including batteries for a child's toy or adding extra funds to cover the tax and tip for a massage gift certificate. Bigger purchases require up-front approval from the recipient, Smith says. Shoppers who would rather keep the surprise might offer an IOU or homemade certificate in lieu of having, say, a new car waiting in the driveway.
Here are four presents that require some upfront discussion or disclosure, and maybe some extra cash to help defray the future costs:
It's safe for givers to assume that the recipient of a 3G- or 4G-capable tablet will run up bills for apps, but it's the cost for data via associated wireless services that givers often overlook, says Alex Goldfayn, chief executive of the Evangelist Marketing Institute, a technology consulting firm. Some require a two-year contract with purchase. On a $300 T-Mobile G-Slate with Google tablet, for example, that adds $960 to $1,920 over 24 months. The iPad 2 allows users to pay for 3G connectivity month by month with no contract, but the giver must decide at time of purchase to get an AT&T version of the tablet, or a Verizon one. Each carrier has a different pricing scheme, and choice on the giver's part could cost the recipient extra. Someone using 2GB per month would spend $120 more over two years with Verizon than AT&T. But someone using 5 GB per month would spend $120 more at AT&T than Verizon. It's better to consult the gift recipient before buying, Goldfayn says.
Waking to find a new car (topped with a gigantic red bow, naturally) in the driveway may be the most expensive present of all. Over five years, fuel, insurance, maintenance and other costs can run into the tens of thousands. By Edmunds.com's calculations, for example, a $55,900 2011 BMW M3 sedan will cost its owner an extra $6,175 in the first year alone, assuming the giver paid cash for the vehicle and covered the nearly $6,000 in taxes and fees. Over five years, the cost to own balloons to a total $40,401. There's no room for buyer's (or recipient's) remorse, either: Cars typically can't be returned or exchanged once they leave the lot, says Jack Nerad, the executive editorial director for Kelley Blue Book. "You don't want to get the wrong car, that's for sure," he says.
"Deciding to get a pet is right up there with all the major lifestyle commitments like buying a home or a car," says Gail Buchwald, a senior vice president for the ASPCA. Because many pets can live 15 years or more, givers are signing up the recipients for a long financial commitment. By the association's estimates, a cat costs $1,035 over the first year of ownership and $670 thereafter, while a large dog generates $1,843 in bills the first year and another $875 each subsequent year. Even caring for a small animal like a guinea pig can cost upwards of $600 annually. And that assumes the animal is a good fit. Truly surprise pets are often relinquished to shelters, Buchwald says, because the owner had a different preference or didn't anticipate the workload involved with caring for an animal.
Research indicates that shoppers spend 140% of the face value of their gift card, which means someone with a $50 to burn is typically spending an extra $20 of his or her own cash. But fees can also eat away at the balance, giving the recipient less to spend in the first place, says Judd Lillestrand, chief executive of ScripSmart, a gift card comparison site. Bank-issued cards are the worst offenders -- some deduct as much as $5 per month from the balance after 12 months of inactivity. Retailer gift cards typically don't expire or charge the recipient extra fees, but there are a few exceptions. Before buying, givers should check the terms and conditions, which under new gift card regulations must fully disclose all applicable fees.