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Avoid a festive financial hangover – start saving!

Avoid a festive financial hangover – start saving!

Category: Savings

Updated: 28/08/2015
First Published: 28/08/2015

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

OK, we know it's a bit soon to be talking about Christmas, but if you want to make sure you can comfortably cover the cost, you probably want to start thinking about it – and saving accordingly. If you're one of those ultra-organised types you may already have a festive savings pot that you've been adding to throughout the year, but if not, now's the time to start!

Be prepared for your festive spend

According to research from Halifax, people spent an average of £469 on Christmas last year, including all spending on gifts, food and socialising. That'll be a lot to cover out of a single pay cheque, and with only 17 weeks to go until the main event, it'd be wise to start squirreling away as much as you can.

Halifax has done the calculations and recommends that savers put away around £28 per week (£120 a month) into a dedicated savings account to comfortably cover the cost, and with this being payday for many people, now's the perfect time to start! However, you may want to save even more that that – 25% of respondents admitted that they spent more on Christmas 2014 than they did the previous year, with 29% agreeing that they overspent, so you may want to prepare for the possibility of spending more than you bargained for.

It may sound like a lot to put aside, but it could be better than the alternative – turning to credit. If you're not confident you'll be able to pay a credit card balance off quickly, you may find that your financial hangover lasts far longer than you were hoping for; 27% of consumers still had outstanding Christmas payments at the start of February this year, and many predicted that they would still be paying it off in April.

This kind of hangover could have serious consequences, with 30% of those consumers being concerned that they'd need to make cutbacks on non-essential spending to pay for the cost of the previous Christmas. A further 13% thought they might have to forego a holiday, and a particularly worrying finding was the fact that 12% feared they would be unable to afford their utility bills as a result of their festive spend.

Avoid the hangover

This is why it's so important to start planning early. Happily, 36% have the right idea and save specifically for Christmas, but the majority (61%) fund some of their Christmas spending with their salary. A further third (31%) also rely on a form of credit, usually credit cards (26%), and while this isn't ideal, there is a way to make it more cost-effective – by using a card that charges 0% interest on purchases.

These 0% purchase cards can be a great choice for those who don't have the funds available to pay for Christmas outright, as although you'll still need to pay the balance off in the future, you needn't worry about interest adding to the bill. It could be a great way to spread the cost, and with competition fierce in the sector, you'll be able to find fantastic terms, too.

Really, though, you'll want to keep your reliance on credit to a minimum, which is why you'll want to start saving right now. An easy access account could be the perfect choice for this kind of savings goal – you can add to it regularly over the next few months and will have built up a healthy pot by the time December hits, giving you everything you need to cover your festive spend.

It may be a while away, but it'll pay to be prepared! Giles Martin, head of Halifax Savings, agrees: "Whilst Christmas is unlikely to be at the top of people's priorities as they return from their summer holidays, with the cost of the festive season nearing £500 and the hangover stretching for some into April, it's never too early to think about how you will pay for it.

"Christmas can put real pressure on people's finances, but putting money aside each month can really help to spread the cost. If you can afford to save regularly, then the earlier you start the less you need to find each month."

What next?

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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