Stop Spending and Start Saving

The 4 Gift Rule: What It Is and Why You Should Follow It

Listen Money Matters is reader-supported. When you buy through links on our site, we may earn an affiliate commission. How we make money.

Are your children getting a little too greedy? You might want to introduce them to the 4 gift rule and save money in the process.

Holiday Shopping

Last year, the average American spent $659 on gifts (while a Gallup poll listed it at $942) for family and friends. When you include birthdays, Easter, gifts from “Santa”, gifts for an excellent report card, not to mention presents from family members and friends, the numbers start to add up.

And many of those gifts will be forgotten at the bottom of a toy chest long before the next gift-giving occasion rolls around.

Gifts Can Have Negative Consequences

When you or anyone give a child a gift, that is a well-meaning gesture. And it is. But when children receive too many gifts it can create problems in the short term and throughout their lives.

Greedy children can turn into adults who have problems with compulsive shopping, credit card debt (fuelled by compulsive shopping), and even gambling problems.

Some parents use gifts to assuage guilt; maybe they work a lot and don’t spend a lot of time with their children or are the non-custodial parent after a divorce and buy the children lots of gifts to make up for not seeing them every day. Having a lot of material things does not correlate with high levels of self-esteem. Having a strong relationship with parents does.

Indeed, money doesn’t buy happiness, and receiving gifts doesn’t either. Giving to others has been proven to increase happiness, so teaching children to be generous with others will provide them with a source of happiness.

Also, when childfree people (like me) see your greedy brat having a meltdown in Target and wailing for a toy, we are judging you!

Want to get your money under control?

This is our guide to budgeting simply and effectively. We walk you through exactly how to use Mint, what your budget should be, and how to monitor your spending automatically.

Get the Course
Lasso Brag

What Is the 4 Gift Rule

The 4 gift rule says you limit the number of gifts you buy your children to four, one from each of the four categories: Something they want, need, wear, and read.

It’s an easy way to teach your children that they can’t have everything they want.

This is similar to the 3 gift rule, where each child gets three gifts symbolizing what the three wise men gave to the baby Jesus.

Something They Want

This is a gift the child chooses for themselves and is usually the “big” gift they receive. They can make a list of a few options and the parents can decide, or they can choose one thing, and that’s what they’ll receive. Part of the fun of getting a gift is the surprise so the list of choices seems more exciting.

Something They Need

Depending on the age of the child, this could be up to them or up to the parents. For a baby, it might be to start a 529 College Savings Plan. For a teenager going to college in the fall, it might be a laptop.

Something to Wear

Considering that four gifts are not an overwhelming amount, maybe make the gift in this category a little better than new socks or underwear. A new winter coat or a new pair of expensive sneakers seem more appropriate.

Something to Read

For some of us, this overlaps with the first category. Books are the best gifts! This is another splurge category. If your child is very small, maybe something like a whole set of Golden Books and for the older kids, the complete set of Harry Potter or the entire works of their favorite author.

A pile of wrapped presents

Gift Ideas

Christmas shopping gets hectic, especially when Christmas Eve is right around the corner and you’re running out of ideas. If you’re buying gifts for your kiddos, extended family, or another loved one, you may find our sister site, GiftLab, helpful. It’s full of things to add to your wishlist.

Check out this list of stocking stuffers, gifts for 14-year-old boys, or things for five-year-old girls. Potentially better options than a gift card.

Added Benefits of the 4 Gift Rule

There are lots of great reasons to follow the four gift rule that doesn’t have anything to do with raising grateful, non-greedy children. You don’t have endless amounts of money to spend on expensive gifts, and even if you set a gift budget, it’s probably a lot more than it will be when you adopt the four gift rule.

The four gift rule is green. So much of what is made for children is plastic junk that will sit in a landfill somewhere, not degrading for hundreds of years. And it comes packaged in more plastic.

Manufacturing all that third world made junk pollutes the environment, and much of it is made using child labor. Twenty million child laborers work in factories that manufacture toys along with other things like clothes and carpet.

It’s less clutter in your house, which means you can live in a smaller home lowering your housing costs!

Do You Still Need a Gift Budget?

Yes, you need a budget for all of your spending. Your gift budget shouldn’t be hastily scraped together at the last minute. You should have a budget category for gifts year-round. Gift-giving occasions pop up all year long, Valentine’s Day, graduations, anniversaries. Many of these holidays shouldn’t come as a shock. Christmas is on the same date each year.

Should your Christmas budget be any different than past years if you adopt the four gift rule? Yes, that’s part of the point. The main reason to do it is so children are not overwhelmed with gifts and come to expect that kind of largesse all the time. But saving money is a motivator too.

Raising kids isn’t cheap. It costs a quarter of a million dollars to do it to 18 so that doesn’t even include college. The money you save by following the four gift rule can be better spent buying your children food or health insurance.

Gifting a Pile of Presents Won’t Be Remembered

Do you remember what toys you got for Christmas as a kid? I remember one, a Light Bright and I think the only reason I remember that is because I remember turning off the kitchen lights and playing with it with my grandmother.

The only other toys I can remember are because there are pictures of me posing with them as I opened them. Your kids won’t remember all those plastic toys either.

What They Will Remember

You don’t want to feel like Scrooge during the holiday season. You want your family to have happy holiday memories. Happy, lasting memories are created not by the amount of money you spend, but by the things you do together. Start holiday traditions the whole family can enjoy like caroling or going to a tree farm to select and cut your Christmas tree.

Celebrate a birthday by taking a trip to the zoo or an amusement park. Decorate cupcakes together for Easter. It’s those things that children will remember and associate with holidays, that you spent time together as a family.

Will the 4 Gift Rule Work?

Should you try to get other family members who buy gifts for your children on board with the four gift rule? That’s a personal decision. Some may be grateful for the decision, especially grandparents who have several grandkids to buy gifts for.

Some people may resent it and find it too controlling or miserly. You should probably pick your battle here. If implementing the four gift rule is important to you, explain why (or just send this article!). In the end, you are the parent and how you raise your kids is up to you.

If this is not a battle you want to fight, there are still ways to teach your kids that they can’t expect lots of gifts and gifts aren’t what makes you happy. You can try things like requiring that for every new gift they receive they have to donate an older toy to a children’s charity. Maybe for every X number of items donated you will take them on a special outing.

If a family member asks your child for a list of gifts, only make the list a few items long. Ask that rather than buying so many gifts, they contribute to your child’s college fund instead. You can try to steer them to certain types of gifts, things like board games and puzzles that can be enjoyed as a family or active things like a yearly pass to a museum.

Part of Parenting

It’s fun to spoil kids, they’re only kids for a little while after all. But that is the point of things like the 4 gift rule and teaching good money habits early. They are only kids for a few years, they are adults much longer. The things you teach them as children will shape the kind of adult they become.

Teaching children that material things don’t bring happiness will make them happier adults. Teaching them to be generous to others will make them kinder adults. And teaching them that they can’t have everything they want will make them better equipped to handle their personal finances.

Get our best strategies, tools, and support sent straight to your inbox.

Candice Elliott - Senior Editor Candice Elliott is a substantial contributor to Listen Money Matters. She has been a personal finance writer since 2013 and has written extensively on student loan debt, investing, and credit. She has successfully navigated these areas in her own life and knows how to help others do the same. Candice has answered thousands of questions from the LMM community and spent countless hours doing research for hundreds of personal finance articles. She happily calls New Orleans, Louisiana home-the most fun city in the world.
learn courses podcast popular toolbox