We're not ones to get ahead of ourselves, and we resent retailers stocking Christmas goods in August as much as the next financial website. But, have you started thinking about how you'll fund the festive season? If not, it could be time to…
Christmas is a mere four months away, and as much as we love the summer and don't want to think about wintry weather just yet, we realise the importance of planning ahead. Hopefully you will too, particularly if you're still suffering a financial hangover from last Christmas. Did you end up overspending, perhaps on credit cards, and find that you're still paying the balance off?
If so, it's even more important to be prepared. Research from Halifax has shown just how much preparation could be required: last year, the average amount spent on Christmas was a whopping £482, and the resulting financial hangover lasted well into the new year. More than half (55%) of those surveyed admitted they had to make cutbacks in January to pay off any outstanding debts, and 6% thought they'd still be paying for it until this summer.
We don't want to scare you even more, but you could be running out of time if you want to avoid repeating things this year. Chances are you've only got around four paydays left until the season hits, and Halifax calculates that the average person would need to put aside around £96 a month – from August – if they wanted to cover the cost of Christmas through savings alone.
If you left it until October, you'd need to put aside even more (£160) if you were hoping to rack up the £482 total. And, to add insult to injury, if you'd started saving in January, you'd have only needed to put aside around £40 a month to keep large festive bills at bay.
Richard Fearon, head of Halifax Savings, commented: "While it seems early to be discussing Christmas, with the average person spending just under £500 on the festive season, 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."
Of course, using your savings won't be the only option, and a combination of different resources is often preferred. Last year, 67% of those surveyed used their December salary, while 55% dipped into their savings, and 34% used a credit card to help cover the cost.
However, 14% went into their overdraft and 7% used a payday loan in order to pay for the festivities, neither of which is ideal. That's why making the effort to plan ahead and set aside a reasonable amount each month will always be the best option, ensuring you're not still paying for Christmas when you should be lazing on the beach.
"It's never too early to begin saving, and if you can afford to save regularly then the earlier you start the less you need to find each month," added Richard. "It can also be useful to have separate savings accounts for separate purposes to avoid you dipping into funds intended to pay for other things. The important thing is to get into a savings habit that's manageable for you, and then you'll be more likely to keep it up."
Of course, it isn't always that easy, and you could well find that you're still in a state of last-minute panic when you're trying to drum up some Christmas spending money. Happily, there could be an alternative for the truly financially savvy – 0% credit cards cards.
Sylvia Waycot, editor of Moneyfacts.co.uk, explains:
"One way to spread the cost of Christmas is to start shopping early and put a little aside each week so that you don't have to fork out a fortune at the last minute. But if Christmas sneaks up on you each year, even though we have 12 months' notice, you may need immediate cash.
"If so, you could consider one of the 0% purchase cards that charge no interest at all for several months, and as an added bonus these cards only take a few days to arrive in the post so they can really help with last-minute planning. Alternatively, you could transfer a credit card balance you are paying interest on to a 0% balance transfer card after the festive season – just make sure you work out how much you need to pay back each month in order to clear the card within the time allowed."
Either of these options could help you spread the cost. You'll still need to pay off the balance in the new year but, with no interest being accrued, you won't have such a financial hangover – and as long as you keep track of things it could be win win.
Ideally, however, you'll be prepared with sufficient savings – and if you're not ready for this year, start getting into the habit for the next one. Ms Waycot concludes: "For those that like to plan ahead, a regular savings account where you commit to putting a set amount of cash away each month will allow you to sail through Christmas without the flurry of bills ruining New Year."
Compare savings accountsCheck out 0% balance transfer cardsConsider 0% purchase cards
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.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.