With the average price of gas at $2.74 on December 3, 2014, gas prices in the U.S. are down from $3.26 one year ago. That’s a substantial savings of fifty-two cents for a gallon of regular, and a welcome economic breath for American families as they enter the holiday season. The gas price relief was clearly felt by families over Thanksgiving weekend, which AAA reported had record folks on the road for the holiday, the highest number of road travelers since 2007 – before the Recession hit the nation.

U.S. National Gas Prices, AAA Fuel Gauge Report, December 2013-2014

U.S. National Gas Prices, AAA Fuel Gauge Report, December 2013-2014

The average driver living in the U.S. would save about $1,100 annually on gas, based on calculations from Goldman Sachs who coin this phenomenon a virtual “tax cut” for American consumers.

This windfall has become a big reason why people feel more financially flush this holiday season. Americans are on an economic confidence high: Gallup’s U.S. economic confidence index in November 2014 hit a 17-month peak.

Gallup economic confidence index November 2014

Gallup notes that this is the second-highest monthly read since they began measuring consumer confidence in January 2008. Gallup bases the confidence index on two factors: how people look at the current economy, and whether they believe the economy is getting better or worse.

With that sense of optimism, early signs show people are spending more in retail for holiday gift-giving. That sense of optimism may be rational in terms of gas price savings, but other spending categories are eating up peoples’ relatively flat incomes – so that basic costs of living are still squeezing most American families, as reported in the Wall Street Journal on December 1, 2014.

While some categories of household spending fell between 2007 and 2013, including landline phones (31%), household textiles (bedding, curtains and like) by 27%, and women’s apparel (by 18%), the latter two categories driven down by lower prices from Asian imports. But spending on significant household budget line-items grew at the same time according to the Bureau of Labor Statistics, illustrated in the graphic below:

  • Home internet increased 81%
  • Cell phone costs rose 49%
  • Home rents escalated 26%
  • Education increased 23%
  • Health insurance spending increased by 42%, and
  • Health care costs rose 24%.

WSJ chart on household health spending Dec 1 2014

The Wall Street Journal described a woman covered by health insurance who had one cataract procedure in 2007 which cost $189, and the same operation in 2014 which ran $1,700 in out-of-pocket payments. Her husband is quoted as saying, “Same procedure, same doctor, same wife,” but in 2014, different health insurance plan and cost-sharing responsibility.

Will declining gas prices cover health care cost increases? Don’t count on it.

The question you face In December 2014 is: what could you do with your $1,100 gas savings surplus this holiday season? Here are some things you might consider.

Gift a child in your life off with a savings account. Many banks offer youth savings programs that bolster kids’ financial literacy and opportunities to grow balances over time. TD Bank offers     a Young Saver Account, Bank of America has a Custodial Savings Account for Children, Regions Bank features Regions Savings for Minors that can start with as little as a $5 bill, and Capital One offers a Kids Savings Account, among many other savings programs available from U.S. banks.

Pay down credit card debt. Consider using your $1,100 gas windfall for paying off a credit card balance. That’s the biggest direct financial gift you can give yourself given that the average percentage charged on a credit card balance in late November 2014 was about 13%, according to Bankrate. You can’t find a guaranteed savings rate as high as 13% on the planet.

Don’t put off medical care. Give yourself the gift of health. At least 1 in 3 U.S. consumers delays getting health care due to costs, despite the fact that more people in America have health insurance. And 22% of people say they’ve put off health care even though they have a serious condition.

Gallup health costs cause self-rationing

That may be fiscally rational in the short-run, but physically irrational in the longer term. If you seek care sooner, you could be saving your life or, at a minimum, saving downstream health costs that add up by postponing a diagnosis or filling a prescription that could avoid an emergency room visit of hospital admission.

Save (a little bit) more. If you don’t carry credit card debt from month to month, you are in a minority. This puts you in a great position to put some of that $1,100 gas windfall into short-term (liquid) savings for yourself or for your retirement for use in the longer run. In his New York Times column from November 10, 2014, Saving Ourselves From Not Saving, Carl Richards the “Sketch Guy” listed four options people have to deal with low levels of saving money. Richards wrote that we can:

  1. Dismiss the topic and ignore it, and not look in the mirror (on use a calculator) to confirm lack of saving
  2. Delay thinking about it, assuming we’ll get started later – avoiding the fact that time is our friend in compounding the value of money and savings
  3. Secretly believe in magic, like winning the lottery or striking natural gas under our home
  4. Make tough choices, like downsizing a car, moving to a lower-cost area, or using an urgent care clinic instead of a hospital emergency room when we aren’t dealing with a very serious illness.

NY Times graphic tough choices on saving

At this holiday season and in the New Year, we should first count our blessings: what do we already have that’s good. You could point to a variety of good things in your life that aren’t really things at all: your health, the people who you care about (family and the friends you consider family), your home, your spiritual life, your community, your golf game, the race you recently ran. Blessings are in the eye of the beholder and it matters not what your own definition is. What matters most is your sense of security on all levels, personal, financial, health-wise – and making choices that help you get where you want to be in your life. That gas windfall is certainly a financial blessing: how might you best maximize it as a gift – to others or to your own financial wellness — this holiday season?