It's the time of the year again! The Christmas shopping season is just right around the corner!
Have you started brainstorming gifts ideas and getting ready for the frenzy of holiday shopping? Or are these additional expenses giving you headache?
Let's be honest. While shopping for the holiday is usually something to enjoy, this year many of us are facing a tighter holiday budget than ever before. With inflation soaring, everything has become more expensive, and it's likely that you need to save more if you are to avoid taking on excessive credit card debt.
So, here comes the question: How can you save money during holidays when inflation is running as high as it is?
While it can be challenging, there are some tips that may help you prepare for the holiday season and deal with the unexpected financial stress. In this blog post, we will guide you through tools such as Christmas club accounts and other alternative methods that can help you meet your holiday savings goals and boost your Christmas budget.
Christmas club account
Many Americans find it difficult to save for the future, especially when the holidays roll around.
There is no need to feel embarrassed if you find yourself tempted to overspend. In fact, the National Retail Federation has recently forecasted that holiday spending in the nation is expected to reach record levels during November and December. It predicts a 3% to 4% growth over 2022, with the total amount reaching $957.3 billion or $966.6 billion.
Christmas club accounts, also known as Christmas savings accounts, are the type of short term savings accounts that can help grow your Christmas fund. A Christmas club account allows you to earn interest on small deposits made throughout the year, and provide access to your balance only one or two months prior to the holiday season.
Where can I open a Christmas club account?
Many banks and credit unions throughout the country offer Christmas club accounts, with most of them being small community banks that are more likely to provide savings account tailored to specific needs.
Alternatively, you can check with your employer to see if they offer a Christmas Club option. The program allows your employer to set aside a portion of your paycheck each month and release to you in the form of an extra cheque in November or December.
How do Christmas club accounts work?
Unlike a traditional savings account, a Christmas savings account is specifically designed to help you build up a small reserve for holiday spending by the end of the year while minimising the impact on your everyday expenses.
In order to achieve this goal, most Christmas club accounts discourage you from consuming your holiday budget by imposing early withdrawal penalties, typically around $10 per withdrawal. You may also lose the accrued interest in some cases.
In general, the earlier you start saving money, the more money you will accumulated in the account by the maturity date. Christmas club accounts may have minimum opening deposit requirements, but these are generally set at very low levels.
Why do I need a Christmas club account?
If setting money aside each month causes you stress, a Christmas club account is an ideal solution. Once you open an account at a bank or credit union, you can easily set up an auto-draft instruction in just a few steps. This enables regular small deposits to be made from your checking account on a weekly or monthly basis.
However, it is crucial to excise caution and make sure the automatic transfers do not exhaust the balance in your checking account or fall below the minimum balance requirement, which could result in additional banking charges.
While Christmas club accounts are designed to help you save for the holidays, it's also worth noting that the annual percentage yields (APYs) are often small, typically ranging from 0.01% to 0.25%. If you are looking for higher yields from your savings, below are a few alternatives that you may consider.
Money market account
Compared to Christmas club accounts, money market accounts offer higher interest rates and greater flexibility in terms of accessing and managing your funds. You can make direct deposit from your bank account to your money market account and have the flexibility to withdraw funds as needed as long as you remain within the withdrawal limit.
On the flip side, money market accounts often requires a higher minimum balance compared to other types of savings accounts. Additionally, you may face penalties or lose access to the higher-yield interest rate if your account balance falls below a certain threshold.
High-yield savings account
If you are a highly self-disciplined individual that does not need external incentives or penalties to save for holiday expenses, a high-interest savings account will keep your money grow at a faster rate.
In the current high interest cycle, some high-yield savings accounts offer APYs as high as 5% or even higher. While it's an attractive option to maximise the growth of you savings, similar as money market accounts, high-yield savings accounts have withdrawal limits in place. It's important to adhere to these requirements to avoid any potential penalties or loss of interest on your funds.
Which is the best Christmas savings account?
Now that we've explored a variety of savings options, you might be wondering just which one is the best option?
The reality is that there's no universal "best" option that applies to everyone. The "right" type of Christmas savings account ultimately depends on your unique savings goals, initial deposit capacity and desired level of flexibility.
It may also be helpful to speak with a financial advisor to have your financial circumstance professionally evaluated and craft a plan best-aligned with your goals and needs.
Cutting costs by leveraging Lifeline & ACP through EASYWireless
If you still find yourself with limited extra money to set aside, cutting costs can be a viable last resort. You may consider budgeting wisely, making your own Christmas gifts and seeking deals and discounts before making any purchase.
Taking advantage of the upcoming Black Friday and Cyber Monday, for example, can be a great cost-saving strategy. By planning ahead and subscribing to newsletters, you can stay informed about promotions and discounts, allowing you to save extra on gifts or products that are on your wishlist.
In addition, some service providers and merchants offer year-round promotions and deals that can help you reduce your essential costs without compromising on quality of life. For example, you can now take advantage of federal programs like Lifeline and the Affordable Connectivity Program (ACP) through EASY Wireless to score FREE mobile phone services and unlimited mobile data.
Find out more about EASY Wireless and whether you are eligible for this exciting unlimited package!