Written by: Shani Fowler
Okay I know many of us haven’t even been on our summer holidays yet and here I am talking about saving for Christmas! Bear with me – you might just be glad you did come the Yuletide. We all know Christmas can seem a million miles away, but we also know how quickly it creeps round and importantly how expensive it can be. So having a plan with a time frame can help.
Boxing Day blues
Boxing Day last year saw a large amount of people online seeking advice for debt problems, highlighting just how fragile finances can be at that time of year. Worrying about finances straight after Christmas doesn’t give much scope to start planning for the following one, but it would be prudent to start as early as you can.
The government-backed Money Advice Service believe that there is a temptation to go into debt at Christmas but by starting to save now you are more likely to not have to stretch the family budget and be able to have the special Christmas you really want.
How to save
Firstly assess where your money is going now on a monthly basis. Do you need all of the direct debits that go out? Ask yourself – are you going to the gym enough to warrant a direct debit or would you be better to pay as you go? Do you really need a satellite TV or even all the channels? That magazine subscription? Yes the magazines are coming through the door but are you getting chance to read them? If you find you have a backlog, cut the subs and buy as you go.
If your direct debits don’t offer the value, either negotiate with organisations to reduce them or where possible get rid of them – a bit of a banking detox if you like! All these savings can be siphoned into your Christmas fund.
Create a separate Christmas bank account. If you could save £3.00 per day by the end of the year you would have £1095.00 for the Christmas budget which could cover all or most of the costs of presents and the other excess Christmas brings. Saving in bank account, building society or credit union means your money is protected by the Financial Services Compensation Scheme (FSCS) (up to the value of £85,000.00 per person). Cash Isas are also another route worth consideration for Christmas – account holders not only get interest paid into them but the Isas are tax free.
Although subject to a substantial amount of bad press in the recent past, particularly when Farepak collapsed and many people lost their hard earned saving, a little bit resurgence has been steadily gathering regarding Christmas savings club. These schemes redeem savings in December in the form of vouchers, store and gift cards but these schemes are not regulated as tightly as bank or building society accounts so be careful. There is a Christmas Prepayment Association which provides a code of conduct stating that customer’s monies must be ‘ring-fenced’ in a trustee account, but this code is not a government or financial regulator but 50% of the trustees are independent. Not all Christmas clubs or saving schemes are signed up to this though so do your homework. There is a risk if a Christmas club goes out of business that its savers may lose all the money they have put into it.
Some credit unions offer schemes similar to Christmas clubs and these schemes are protected by the FSCS and an estimated 1.15 million Brits are members of a credit union and members. The general manager of London Mutual Credit Union in Peckham says that membership of his credit union has grown 15% in the last year as says members put in an average of £75.00 per month into the Christmas club.
Many supermarkets offer Christmas saving schemes. These are a good idea in part but you are only allowed to spend the savings or ‘stamps’ with that particular retailer and if it is on a card and the card is lost or stolen – it is similar to losing cash. Although it is unlikely for a major supermarket to go bust the retailers are not obliged to ‘ring-fence’ your money or keep it separate.
These are some of the most popular methods of saving for the festive season. You could choose one or mix and match for the different areas of your spending for Christmas; but one thing is for sure, saving early does make it easier on the household come December. So whatever you do it is important to think ahead about the money if you want to avoid getting into debt and suffering from horrendous January blues.