Korean holiday dosh devalued and a drag as inflation bites

Koreans carefully counting their hard-earned won as inflation eats away at the value of earnings are reconsidering how much cash to fork over during the Lunar New Year.

Kindergartners in hanbok, or traditional Korean attire, learn how to take a deep bow on Jan. 12 in Busan. [SONG BONG-GEUN]

Koreans carefully counting their hard-earned won as inflation eats away at the value of earnings are reconsidering how much cash to fork over during the Lunar New Year.

Tradition dictates that that money is given in envelops to younger Koreans during the holiday — known as sebaetdon — and these little gifts can add up quickly.

Forty-two-year-old office worker Ji Sang-won prepared a total of 300,000 won ($241) as New Year's money this year.

Ji is planning to give 100,000 won each to his two young nephews. He gave 50,000 each until last year, but decided to double the amount from the upcoming Lunar New Year. He will give 50,000 won each to his two own kids.

“Even if I can cut everything else, I couldn't cut the New Year's money for children,” Ji said.

The Lunar New Year holiday, which runs Jan. 21 to 24 this year, is the first restrictions-free Lunar New Year in three years since the Covid-19 outbreak, and more families and expected to meet in person.

The cost of sebaetdon is a hit topic recently, in line with questions about cash wedding gifts. They are both stressful but inescapable.

In 2021, Korea’s inflation hit 5.1 percent, the highest in 24 years. This led to the question of why the general amount of congratulatory money — 50,000 won remains the same and about how much should be given at New Years.

According to a recent survey done by SK Communications from Dec. 28-Jan. 4 on 6,044 people aged over 18, 43 percent of the respondents said they consider 50,000 won as the acceptable amount for New Year's money this year.

Of those surveyed, 29 percent said they would give nothing at all, 15 percent said 10,000 won and 10 percent 100,000 won.

"Despite the recession, a 50,000-won bill is still favored as a New Year's gift," said Ahn Ji-seon, media services team leader at SK Communications.

In real terms, that means, the kids are getting less.

According to Statistics Korea’s money value calculator, 50,000 won as of last year was worth 42,600 won 10 years ago and 31,350 won 20 years ago. In other words, New Year's money should have doubled over the past 20 years.

According a recent survey by Incruit, 12.8 percent of 828 surveyed answered holiday expenditures was “very burdensome”, and 34.2 percent said it was “a little burdensome.” It also estimated the average for family allowances for this year’s holidays would cost 380,000 won and for Lunar New Year gifts 400,000 won.

“Nearly half of the respondents were found to be feeling the burden of holiday spending,” said Jeong Yeon-woo, team leader at Incruit's brand communication team. “How much to give for New Year's money has always been a topic of question, but as prices rose sharply last year, the burden this year seems to have increased.”

Some experts note that since the 50,000-won banknotes were first issued in 2009, people expect that in their holiday envelope, forcing up the cost of the annual gifts.

A total of 57.3 percent out of 1,000 people questioned for a survey by market research organization Embrain Trend Monitor said the 50,000-won banknote increased the unit for cash gifts for weddings and for sebaetdon. It is related to why the country isn’t issuing a 100,000-won banknote, similar to Japan’s 10,000-yen or the U.S. 100-dollar bill, isn’t being issued despite recent demands given the growth of economy size.

The Bank of Korea is also deeply concerned about large bank notes. A preference for new banknotes, including for 50,000 won, gets intense on holidays such as Lunar New Year and Chuseok to put into envelopes.

The central bank released and transported Lunar New Year funds to each regional commercial bank since Monday, and some banks faced long lines of people rushing to get freshly-printed bills. Some bank branches put a limit on the exchanges that can be made.

The low percentage of notes that are returned to the central bank is also a problem. According to a recent report by the Bank of Korea, the amount of currency circulated increased from 97.38 trillion won by the end of 2016 to 174.86 trillion won by the end of 2022.

The return rate of 50,000 won is very low, so the central bank is limiting exchanges of used banknotes for fresh ones.

BY KIM KI-HWAN, SEO JI-EUN [seo.jieun1@joongang.co.kr]