Want to save money to cover your holiday spending? Learn about holiday savings accounts from Save!
There are two basic options when approaching a holiday: finance purchases on a credit card or pay cash. But before you pull out your credit card, remember that you'll also pay interest on those charges! Savvy planners save ahead, but how they do it is the real secret. Holiday savings accounts to the rescue!
Originally known as Christmas Club accounts, holiday savings accounts are separate savings accounts designated specifically for money that will be spent over the holidays. Separate from your regular savings, they're excellent tools for tracking holiday spending only and you earn interest on the money. You can then cash out the account when the holidays start, giving yourself a nice cushion for the season.
Anyone who wants to save ahead can benefit from a holiday savings account. It’s easy to open one at your existing bank or credit union and set up automatic transfers from each paycheck. Shop around to see if any other financial services offer better rates. Either way, a holiday savings account can be a useful way to avoid running up credit card bills over the holidays.
Holiday savings accounts are also a great way to organize your financial planning. If you’re already saving for emergencies or big-ticket items, separating your various savings accounts makes it easier to track what you've saved for each thing. It also helps you stick to a budget and avoid charging your holiday purchases because you've already set aside those Benjamins!
Decide how much you want to spend for the holidays, and what you need to put into the account each pay period. When the holidays arrive, you’ll have what you need (plus interest!).
Opening a holiday savings account is easy. You can call or visit your financial institution or, in most cases, go to the website. Usually you only need $5 or $10 initial balance to open one. For a guaranteed plan, set up a weekly or monthly automatic transfer. If you want to open an account at a bank or credit union where you’re not already a member, check that institution’s rules. Sometimes you need to open another checking or regular savings account and visit in person.
Figure out how much you typically spend at the holidays, including everything from gift buying to holiday tips for service workers. Then divide that amount by the number of months you have until the next holiday season. That’s how much you should put in the account each month if you can afford it.
Pro tip: Make sure you don't need that cash before the holidays. Some accounts charge a penalty for withdrawing the money early.