Do you have a Christmas Savings Account? Given that a recent CNBC article stated that only 39% of Americans have enough savings to cover a $1,000 emergency, most people are not saving for anything, let alone Christmas.
I want to encourage you to take the next step towards making your Christmas holidays less stressful by starting a Christmas savings account. It’s much easier than you think and I will share some tips to help you get started.
Determine How Much Money You Need For Your Christmas Budget
First, make a list of the people you want to buy for, what you want to get them, and how much you want to spend on them. I recommend using Excel or Google sheets, because it makes adding up the figures easier.
Next, consider if you want to have a Christmas picture taken for your Christmas card, and factor in the cost to print and mail those.
Last, consider others. It seems that around the holiday times, we often hear of those suffering misfortune or those in need. The spirit of Christmas is about giving, not receiving. In fact, we are celebrating the fact that we received the greatest gift we could ever receive, so giving just makes sense around Christmas time.
Add all of those figures up, and now you have your Christmas Savings budget.
The Best Time to Start a Christmas Savings Account
If this if your first time creating a Christmas savings plan, I recommend starting at the first of the new year. Take your budget from the prior step, and break it down either into 10 monthly payments or 40 weekly payments. You can then start to set aside either the weekly or monthly-determined amount, and then on November 1, you will have the amount you need for the Christmas holiday. I recommend automating this savings so you don’t have to think about it. I started automating my savings after reading Davis Bach’s book, The Automatic Millionaire, and as he points out, once you start automating your savings, you won’t miss it.
Since you have that amount in your budget, you will want to keep saving even through the holidays and at this point, you might want to re-adjust the figure since you will now have 12 months or 52 weeks to save for next year.
If you start later than the first of the year, adjust your savings plan to make sure that you have the amount you need by November first. While it’s best to save and plan for holiday expenses, if you fall short, remember that whatever you save is more than you would have had if you didn’t save at all.
Where to Save & Why Don’t Recommend a Christmas Club Account
Years ago, banks offered Christmas Savings Accounts, but over time they have lost popularity. Some Credit Unions offer what are known as Christmas Clubs, which are essentially the same thing. I don’t recommend them because I have not found any that offer an interest rate of substance. I understand that this is not an account intended to grow to a large amount, however I always believe in earning as much interest as possible. On a quick search, I found and handful of these clubs, however I could not find any Christmas clubs offering more than 0.50% interest.
I recommend putting the money in a high yield savings account where you will earn at least 2% interest. Here are several banks currently offering at least 2% interest, and I am sure there are others. For the record, the below information was accurate at the time I wrote this post, and is subject to change.
- American Express – No minimums & no fees.
- Ally Bank – No minimums & no fees.
- CIT Bank (Requires at least $100 to open and $100 per month deposit to qualify.)
- PNC – No minimums & no fees.
- E-Trade Premium Savings (Requires average monthly balance of $1,000 to avoid monthly fee.)
Chances are you will enjoy the higher interests rates so much that you might want to move all of your savings into the same institution, or make your Christmas Savings Account a portion of a larger savings account with one of these banks. I remember when I first found out about these and I was earning 0.5% or less on my savings. I immediately moved all of my savings and I am much happier seeing the interest grow, even though it is a small number, 2% is 10 times 0.20% which is what my primary bank was paying me.
What To Do If You Simply Don’t Have the Money to Save?
Perhaps you don’t have room in your budget to save weekly or monthly, and if that’s so, that is all the more reason you need to set aside money for the holidays. If you don’t have the money now, it won’t magically appear because Christmas comes. This means you will likely take money from somewhere else in your budget and fall behind or run up your credit cards, which will add to your debt and increase your monthly expenses.
Here are a few options that may help to find money for your Christmas budget:
- Reduce your monthly expenses. There is almost always somewhere you can cut.
- Increase your income. If you are employed, perhaps it’s time to negotiate a raise. If you are self-employed, you can acquire new clients or customers.
- Start a side hustle. This is a great way to help fix your budget, and find a new source for savings – Christmas and otherwise.
I hope this is helpful. I’d love to hear how this helps you plan for the holidays and reduce your financial stress!