It’s only been in the last couple of months that I’ve become much more intentional about how I spend my money, particularly when it comes to saving for significant events. Instead of paying for things and “figuring them out later,” I now make sure I’m allocating my funds appropriately when I know I’ll need to spend larger amounts of money (which for me is anything over $100).
One of those large spending events is Christmas. Christmas is only 21-ish weeks away and while it may seem like a long time, we all know how quickly the holidays will creep up. In years past, my Christmas shopping would vary. Some years, I’d start as early as November and wrap things up quickly. Other years, I’d run down to wire on getting last minute gifts.
No matter the approach I took for gift shopping, one thing was constant – trying to budget Christmas shopping alongside bills and other expenses is tough. What I was able to buy was determined by how much I had left over from that week’s paycheck. It’s a crappy approach that left me more stressed out than I should have been. Worse? I’m guilty of charging gifts on a credit card because I felt like I had no other option.
But not anymore! Starting a Christmas fund is one of the best things I’ve done, and I’m hoping it’s something you can get excited about, too!
Why You Should Start a Christmas Fund
At a minimum, you should start a Christmas fund to give yourself some peace of mind. Things come up and you don’t want to find yourself putting Christmas gifts on a credit card. Shoppers on average are putting $1,054 worth of Christmas gifts on credit cards. When paying just the minimum, it’ll take years to pay off, thanks to the interest.
You don’t want to find yourself in this situation if you can avoid it. Spreading holiday cheer is great, but not if it jeopardizes your financial health.
It’s also important to get yourself into the habit of saving first and spending second. Even if it’s an extra $20 you deposit a month, the act of saving is more powerful than the dollar amount. If you enjoy saving up for Christmas, you’ll enjoy saving up for other parts of the year like birthdays, vacations, and more.
Most importantly, your Christmas fund can act as an emergency fund if something comes up before you’re ready to start shopping. Getting started is super easy and you’ll feel great that you’re being intentional with your money.
How to Start a Christmas Fund
Establish Your Savings Goal and Start Early
Often, our spending habits for Christmas can be fairly consistent. Look at what you spent last year as a starting point. Do you feel like that was sufficient enough? If so, use that as your savings goal.
Once you have a dollar amount in mind you want to target, just take that number and divide it by the remaining months until December. The earlier you start, the less you’ll have to save each month.
Take Advantage of High-Yield Savings Accounts
A high-yield savings account is a savings account that pays out a higher percentage annually compared to a traditional savings account. They can also offer additional benefits including no account fees, no account minimums, and they’ll waive ATM fees.
Since you’re saving for Christmas, the idea is that you’re not going to touch it until then. As your money sits in a high-yield account, it’ll earn more interest (aka more money) than a regular savings account.
For example, TD Bank’s Simple Savings account offers 0.05% APY*. Ally Bank’s Online Savings Account offers 2.10% APY*. If your Christmas fund target is $1,000:
$1,000 x .0005 = $.50 of interest earned with TD Bank
$1,000 x .0210 = $21 of interest earned with Ally Bank
Switching to a high-yield savings account is easy and it’s one of the best personal finance decisions you can make. I personally have Ally Bank and I enjoy earning more on my money AND not paying fees. Stick your Christmas fund in one of these guys and keep it moving.
*APYs are current at the time of publish.
Make It Automatic
Now that you know how much you need to put aside each month, you can set up automatic withdraws every time you get paid. This option provides you with a frictionless savings experience and gives you one less thing you have to worry about.
Most companies have a self-serve payroll system that lets you do this online. It takes just a couple minutes of your time, but you’ll be so happy you did.
What do you think about starting a Christmas fund? I think it’s worth it have some peace of mind around the holidays. Will you start one? Let me know!
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