With the approaching holidays, many Slovak households face increased financial demands.
A survey by EOS KSI Slovensko confirms that up to 10.4 percent of Slovaks surveyed feel that spending on holidays and gifts is a burden.
Alarmingly, holiday gifts are ranked as one of the standard largest financial items for Slovak households, following daily essential expenses for food, energy and water, housing costs, healthcare, and transportation to work.
These are the primary items that dominate among respondents:
- 62.5% food
- 47.4% energy and water
- 47.3% housing costs, including rent
- 21% healthcare
- 10% holidays and gifts
The percentages exceed 100 percent as respondents had the option to choose multiple answers (see GRAPH in the attachment).
Why getting into debt for Christmas is risky
Experts warn that getting into debt for holiday expenses is short-sighted and can have long-term negative consequences. Borrowing money for short-term needs can lead to several years of repayment with high interest. This type of financing is particularly risky for lower-income households.
"In addition to financial problems, indebtedness can also increase stress and tension in family relationships, which can manifest in conflicts and a deterioration in the quality of family life during the holidays," warns EOS KSI Slovensko specialist Peter Čanda, adding: "The pressure for general pre-Christmas spending is more a result of social expectations than the need for a festive experience."
Definition of good and bad debt
If it's a long-term, necessary investment in housing, an investment in health or education, or the purchase of a useful item with a long lifespan, it makes sense to borrow. In these cases, it is a so-called good debt.
Paying for a luxury holiday on credit, an expensive car brand, or the latest mobile phone model are bad debts and do not make sense, warns Peter Dvornák, director of EOS KSI Slovensko. "The golden rule of financial literacy states that the repayment period should not exceed the lifespan of the item you are buying," he repeats.
Current debt figures for Slovaks
The EOS KSI Slovensko survey also showed that 23.9% of respondents currently admit to having a loan, and this group consists mainly of:
- People aged 34-49;
- Working individuals with higher incomes over 1200 euros;
- Parents living with children in the household.
A third of respondents (35.3%) had a loan in the past but have already paid it off.
Another third of respondents (38.5%) have never had a loan, and this group consists mainly of:
- Women;
- The youngest and oldest people;
- Residents of the Nitra region;
- People with low incomes up to €500.
"Compared to last year, the proportion of indebted respondents has decreased by 6 percentage points," notes Václav Hřích, director of the AKO Agency, on the positive trend.
How to have a good holiday season
The foundation of financial stability is planning and building a financial reserve. "This means no spontaneous purchases. You need to observe your loved ones throughout the year, find out what their wishes are, and gradually prepare from one Christmas to the next. That way, we don't spend a lot of money at once and avoid getting into debt," recommends Andrea Slezáková from EOS KSI Slovensko, who focuses on financial literacy.
A second alternative is for several people to contribute to one gift. This puts less strain on an individual's budget, and the family can work together to give a valuable present.
Even financial experts highlight the opportunity to be with loved ones as the greatest advantage of the holidays. "Shared moments with family and being present together, instead of buying expensive gifts, bring the same or higher value without additional costs," concludes Andrea Slezáková.