Start saving now for next Christmas

Esther Shaw / 04 February 2015 ( 05 April 2017 )

With Christmas behind us, the next one may be the very last thing on your mind. But with many people feeling the effects of over-spending during the festive period, it's never too early to begin thinking about how you are going to fund next year’s festivities.



Be wary of Christmas savings clubs

Traditionally, lots of people have put spare cash into Christmas savings clubs. With these firms, you squirrel money away throughout the year, and usually can’t get at it until a few weeks before the big day.

While this may sound like a good way to build funds, these clubs don’t pay interest, and with some, you may have to exchange your savings for shopping vouchers or gift cards.

In addition, these firms are not regulated by the Financial Conduct Authority and they are also not protected by the Financial Services Compensation Scheme, so there is a risk you could lose money if the firm collapses. When Farepak went bust back in 2006, many people lost money. There are now tougher safeguards in place, but you still need to tread carefully.

Check interest rates carefully

First off, you could look to see whether any providers are offering dedicated Christmas saver accounts.

These are essentially just regular saver accounts, but with a festive name.  Equally, while these may sound like a sensible option, you do need to check the rate, as these accounts may not offer the most competitive deals.

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Check penalties for withdrawals and missed payments

Generally speaking, the rates on standard regular savers are more competitive.  However, they usually come with flat terms of 12 months, and you may face penalties if you miss any payments over that 12-month period.

You may also get penalised if you want to make a withdrawal, so you may be too late to use one of these accounts for next Christmas – although some accounts do permit one penalty-free withdrawal.

Alternatively, you could also opt for a plain vanilla instant access account, as that way, you can get your hands on your money at any time. Once again, it’s important to shop around for the best rate you can find.

Cash ISAs

Another good option might be a cash individual savings account, as all interest is tax-free.

The ISA limit was raised in April 2017 to £20,000, from the start of the new tax year on 5 April.

For more information on ISAs as an alternative saving option, please click here.

Start saving now

Whatever you do, the key is to begin slotting money away as soon as you can. You might not like to think about it, but preparing now could ease the financial burden of next Christmas.

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.