Never let your society dictate how you should greet someone.
As long as your intentions are sincere and straightforward, there should be no difference between "Happy Holidays" or "Merry Christmas" or "Happy Hanukah" or any other holiday-specific wish. It's not the words you use, but the act of saying the greeting that should count the most.
Some people maintain that "Happy Holidays" is too basic, noncommittal, or a cop-out. In a sense this may be true, but if you as an individual choose not to commit to a specific holidays greeting, that is your right, and the recipient should respect that. Hopefully, he/she will reply with a suitably sincere greeting, even if it's just "You, too."
Naturally, no one expects you to know the religion of every single person you greet during the holiday season, or any other time of the year. Hence, you are freed from the burden of attempting to wish them health and happiness in accordance with their chosen religious practices. First, that's way too complicated. Second, it's unnecessary. Your only real obligation is to be aware of any religious needs of your immediate (and maybe some extended) family.
Additionally, you probably also have a cache of close friends with whom you are familiar enough to know their religious preferences. How many are Methodist, Catholic, Jewish, Hindu, or don't even practice a religion? How many don't care what you say, as long as you can exchange "warm fuzzies" with a nice greeting? The point is that you can't be expected to remember everyone's holiday season well-wishing preference. Some may see this is lazy, but it's simpler to stick with "Happy Holidays!"
As for the possibility of offending a stranger, don't worry about it. If you believe in what you are saying, and you say it with true sincerity, you've done your part. If the other person is too uptight to even note that you went out of your way to wish them well, that's their problem.
On the other hand, if it truly bugs you that a faithful Jew might go ballistic after you say "Merry Christmas," or that a devout Christian might give you the evil eye after you say "Happy Kwanzaa," feel free to relax your boundaries and be generic. If "Happy Holidays" still doesn't feel right to you, you might consider brainstorming a handful of nonspecific holiday phrases to use instead. Perhaps "Enjoy the season" or "Have a good holiday" is more satisfying to you personally.
Any way you look at it, "Merry Christmas" should be just as acceptable as "Happy Holidays." You are wishing the person well during a specific time of year. The inferred meaning is the same; the only difference is the words. Remember: It must come from the heart, or it's not worth saying.
Learn more about this author, Len Morse.
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