Although the holidays are usually a time of joy, gratitude and celebration, they’re also often expensive. All the gifts, decorations, food, travel and parties add up over the holiday season. For many people, it’s easy to overspend or even go into debt.
Fortunately, there are several ways to prevent this from happening. From setting up a special holiday savings account to shopping tactically, it’s possible to save money and prevent your holiday spending from breaking the bank.
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Christmas spending statistics
For most American consumers, the holidays are an expensive time. On average, e-commerce sales over the holidays grow between 1% and 1.5% every year. With more people staying home and turning to online shopping due to the pandemic, this percentage is only set to grow.
According to Adobe Analytics, these are the most recent trends in holiday shopping:
- Online shopping increased by 32.2% from the 2019 holidays to the 2020 holidays, reaching a record $188.20 billion.
- Consumers spent a whopping $1 billion+ daily during the 2020 holidays.
- Holiday revenues exceed $2 billion for more than 50 days of the season.
While the increase in profits is good news for e-commerce businesses, it’s not so great for consumers on a budget. In fact, the Ascent by the Motley Fool surveyed nearly 1,500 people and found:
- Only 56.3% of Americans established a holiday shopping budget, while only 64% stuck with it.
- A little over 21% of respondents ended up in debt in 2019 due to exceeding their Christmas shopping budget.
- Nearly 30% of those who went into debt over the 2019 Christmas holiday had no set plans on how to get their finances back on track.
Finally, according to the National Retail Federation (NRF), American consumers planned to spend approximately $997.79 on gifts, decorations and food during the 2019 holiday season. This is a nominal decrease from the previous year’s spending, but it doesn’t appear to have much impact on the chance of overspending or going into debt.
10 ways to save money this Christmas or Hanukkah
Nobody wants to see their loved ones struggle financially, especially not over a few gifts or a party. As tempting as it is to lavish friends and family with gifts this holiday season, you won’t be doing anyone any favors by going into debt. Set your Christmas budget early, and stick to it.
Here are 10 top money-saving tips to help you avoid overspending this Christmas or Hanukkah, while still enjoying the holidays.
1. Budget
Create a budget and follow it as closely as possible. Figuring out what you can afford – and what you can’t – will help you pay for immediate bills and prepare for the future.
There are many types of budgets, each of which works for different people. If your budget is tight, allocate your paycheck towards fixed and non-fixed expenses first. Try to set aside some money for an emergency fund. Then, use any leftover money for gifts.
If you usually have more money at the end of the month, consider following the 50-20-30 rule. With this budget:
- 50% of the paycheck goes towards the essentials
- 20% goes towards investing and savings
- 30% is for wants (fun, shopping, entertainment, etc.)
Setting a strict budget will help prevent overspending and ensure all bills and other necessary expenses get covered first. Here are some tips from experts to help you get started.
2. Track spending
Tracking your spending is a great way to avoid going over budget or ending up in debt. Start by organizing any active accounts (checking, credit cards, etc.) you have. Review these accounts to see where the money goes each month and how much is coming in vs. going out. Adjust your budget as needed to keep your finances on track.
Cut back on other spending
It’s all too easy to spend money on unnecessary things like automatic digital subscriptions for music or videos.
According to a 2018 survey by MarketWatch, 84% of people spent more on recurring digital subscriptions than they expected. Another survey concluded that around 10% of millennials spend at least $200 each month on subscription services.
Cut back on unnecessary expenditures or cancel subscriptions during the holiday season. Some of the money you save on these subscription services could go towards holiday shopping instead. Also, set aside some of the money in a savings account or invest it.
3. Plan ahead and shop early
Make a shopping list and plan your holiday shopping accordingly. People who start shopping for Christmas, Hanukkah and other holidays early can often take advantage of huge sales like Black Friday or Cyber Monday. With the pandemic, many retailers have shopping sales at the start of November or even earlier.
4. Shop online
Not only are there many great deals to be found online, but some retailers also offer free shipping or special discounts during the holidays. Some retailers, like Amazon, require a monthly membership for things like free shipping, so keep this in mind. If it fits your budget and gift-giving goals, shop online and take advantage of some of these deals.
5. Make a list and stick to it
Make a shopping list and, like with the budget, stick with it. When shopping in person or online, keep an eye out for things like:
- Marketing gimmicks designed to make consumers believe they must spend more money to show they care (example: extra donations to charities or participation in other programs)
- Special discounts that make something seem like a good deal, even if it wasn’t on the shopping list
- Bundle items – if they’re not on the list, don’t get them
These things encourage overspending, which will hurt in the long run.
6. Consider group gifts
If you’re shopping for a lot of people, look into group gifts to avoid overspending. For example, if you’re part of a community group or organization and want to give gifts to everyone, purchase several small gifts in bulk to save money. Even if it seems small, it could still be worth a lot to the recipient.
Here are some group gift ideas to consider:
- Small chocolates in a little mesh bag
- Mini or travel-sized ointments, lip balms or creams
- DIY mani-pedi kit
- Custom-made gifts like picture frames, candles or tree ornaments
7. Regift
Many people probably received gifts they didn’t want or need during last year’s Christmas season. Oftentimes, these gifts stay unopened in their original package in a closet somewhere. If this sounds familiar, you may want to regift it this holiday season.
Regifting isn’t uncommon. There’s even a holiday the Thursday before Christmas called National Re-gifting Day. According to a survey, around 83% of people wouldn’t mind receiving a regifted gift.
8. DIY holiday
For the creative types, a DIY holiday is a great way to save money. Make homemade gifts like baked goods, homemade jams or unique crafts and give them to friends and family members. Make your own gift wrap, or use dollar-store wrapping paper to save a bit of cash.
9. Give fewer gifts
It’s easy to get caught up in the holiday cheer and buy too many presents but try to cut back. Instead of giving everyone multiple gifts, give them one or two thoughtful gifts.
10. Consider an alternative
Rather than spend money on hosting big holiday events or buying a lot of gifts this year, set up a Secret Santa or White Elephant instead.
- Secret Santa. Everyone picks a name from a hat or bag and must secretly give that person a gift. Secret Santa gifts usually have to follow a strict budget of $10 to $50 to prevent overspending.
- White Elephant. In this group game, every participant brings a wrapped present and puts it under a tree or on a table. Each person then takes a number. In order, each person picks out a gift and opens it in front of everyone. The next person repeats this or may choose to “steal” the first person’s present for themselves. If that happens, the first person selects another gift.
Cut back spending on holiday decorations
On average, Americans spend around $61 on Christmas and other holiday decorations a year, not including the tree.
Live evergreen trees usually cost a couple of hundred dollars or less, but some go for much more than that. Plus, they have a one-time use and have to be replaced every year. Artificial trees, meanwhile, cost anywhere from $20 to $200. Since they’re reusable, they’re also much cheaper in the long run.
Check out online marketplaces and apps for used holiday decorations like bulbs, trees and more. Options include:
- Craigslist
- Nextdoor
- Facebook Marketplace
Local stores like Big Lots or Walmart also offer budget-friendly holiday décor. Some retailers offer discounts on trees and decorations right before and after Christmas. These discounts can be up to 90% off in some cases. Get ahead of next year by shopping for these discounts and stocking up for the next holiday season.
Still looking for ways to save money? Here are a few tips:
Forget frugal living: Take on some extra work
Being frugal isn’t the only option to fund your holidays. The gig economy has exploded, so if you have a few spare hours, you can pick up some extra cash with a seasonal delivery job, driving for a rideshare company, testing websites, becoming a mystery shopper or even by taking surveys. Just make sure to research any company to make sure it is legitimate before you sign up, and don’t agree to anything that requires you to make a down-payment or send gift cards.
New year, new start: How to save money for Christmas next year
The new year is the perfect time for a fresh start, so start stashing away some extra cash so your personal finances are in better shape next year. Here are some great ways to kick off a savings plan for 2022.
Start a Christmas Club account
A Christmas Club or holiday club account is essentially a short-term savings account designed to help people save for the holidays without adding to their financial stress. The way it works is simple.
- Set up an account through a community bank or credit union.
- Throughout the year, a small amount of money from each paycheck goes into the account where it will stay and accumulate interest.
- Around the first of November, withdraw the money to use on holiday shopping or things like family vacation.
The Christmas Club account isn’t as popular today as it was in past generations, but it’s still a viable option if you want to save money for the holidays.
Try the “envelope method”
It won’t earn interest, but you could instead mark an envelope for holiday shopping and add a few dollars to it every payday. Keep it somewhere safe and out of sight to avoid the temptation of spending it early.
Start an online savings account
Open a separate online bank account for savings and start making regular contributions to it each month to prepare for the upcoming holiday season. Online banks like Ally Bank are good options because the money will earn interest in the account. If the account comes with a debit card, put it aside somewhere to lessen the temptation of spending the money early.
Take out a credit-builder loan
Credit-builder loans (or “Fresh Start Loans”) help those with no or poor credit improve their credit score. They also are a great way to start a small nest egg. They’re available at many community banks and credit unions and have minimal requirements. Here’s how it works.
- Once approved, the financial institution sets aside the agreed-upon amount in a savings account of certificate of deposit (CD) only they have access to.
- The borrower makes regular payments over a set period. These payments include the principal and interest. Some institutions may reinvest a portion of the interest into the account.
- After the borrower finishes paying off the loan, they gain access to the money and can either withdraw it or leave it to earn interest, depending.
By the end of the loan, not only should there be an increase in the borrower’s credit score, but they’ll also have a small amount in savings they can use for anything they’d like.
Self is a great option for credit-builder loans. You can open an account by paying a one-time fee of $9. After you’ve made $100 in payments, you can apply for a Self secured credit card.
Try a savings challenge
Start a savings challenge as soon as the previous holidays come to an end. Set an achievable savings goal to save a certain amount of money within a set amount of time. Get friends or family members involved to make it more interesting and keep you motivated.
Here are a few savings challenge ideas.
- Set aside $5 or $10 every week in an envelope or online savings account. Let it add up throughout the year.
- In January, set aside $5 a week every week. Increase the amount to $10 for the month of February. In March, set aside $15 a week, followed by $20 a week in April. When May comes around, reset back to $5 a week. If you reset, you’ll have $200 in just four months or $600 by the end of the year.
- Instead of resetting, keep adding $20 a week from April onward. By the end of November, you’ll have $760 for holiday shopping.
Best apps to help you save money for Christmas
With an abundance of fintech products, there are some great apps to help you save money and financially prepare for the holidays.
Apps that round up your everyday purchases
Some apps take every credit and debit card purchase and round it up to the nearest dollar. These apps then take that rounded-up amount and reinvest it back into an account where it earns interest over time.
For example, if you spend $3.24 on a cup of coffee, the app will round it up to $4 and invest the extra $0.76 for you. If you buy coffee five days a week for a month, the app will invest $3.80 a week or $15.20 a month just for coffee. This doesn’t include any other expenditures you make.
Some apps to consider are:
- Digit. For $5 a month, Digit determines your spending habits and transfers a small amount of money from your checking to your Digit account.
- Acorns. For $1 to $3 a month, this app takes the spare change from every debit/credit card purchase and puts it into an investment account with stocks and bonds. Deposits and withdrawals are unlimited.
- Chime. This free mobile bank rounds up money from purchases and puts it into a Chime savings account where it gains a small amount of interest (0.01%).
- Qapital. Qapital rounds up purchases to the nearest dollar, but you can choose a higher amount if desired. This money goes into a savings account or ETF for investment purposes. The app is free to use for the first month.
- Qoins. Originally designed to help consumers pay down debt, Qoins rounds up money from everyday purchases until it reaches a certain amount. If the consumer has a loan they’re trying to pay off, the saved money automatically goes towards the loan. Qoins also has a feature that allows users to save anywhere from $0.50 to $5 a day.
Some of these apps also offer referral bonuses for successfully getting a friend to sign up.
Use cashback apps to save money on online purchases
Cashback apps allow users to earn real money on things they already buy like gas, groceries and gifts. Some cashback apps also offer sign-up bonuses, special deals and automatic discounts. Here are some popular cashback apps to consider:
- Rakuten. Qualifying purchases through the Rakuten Cash Back Visa Credit Card earn up to 3% cash back. Rakuten sends a check once every quarter.
- Honey. Honey Gold offers cash back on qualifying purchases in the form of a gift card. Honey also helps find the best deals for online shopping.
- MyPoints. With MyPoints, you can take surveys, shop online, watch videos and more to earn points that can be redeemed for cash or gift cards.
Use a site like CashBack Monitor or CashbackHolic for a comparison of different cashback services to find the best cashback rates, miles and bonus points for online stores.
Where your money goes each holiday season
Holiday travel
Holiday travel can cost hundreds or thousands of dollars, depending on if the trip is local or international. On average, hotels cost anywhere from 21% to 26% of the total trip. Transportation like airfare costs up to 44%, depending on the destination.
With the pandemic, there are a few additional potential costs to consider. For example, certain flights could be canceled, but hotel reservations are often nonrefundable. COVID-19 tests may also be required for international trips, which adds to the cost.
If you’re planning a trip this holiday season, make sure it’s flexible or refundable in case something happens.
Holiday gift-giving
Gifts under the tree
The average American consumer spends nearly $1,000 on Christmas gifts each year. This is a hefty amount considering that, according to the Bureau of Labor Statistics, the median weekly income for full-time employees was $865 before taxes in 2017.
Gift cards
The average consumer spent around $213 on gift cards in 2019, a 7% increase from the previous year’s holidays.
Food and wine
When it comes to food and wine, costs vary widely. The more budget-conscious may spend as little as $5 a person for the holiday. However, a survey of 1,000 Americans by Lending Tree found that people spent closer to $310 per holiday meal.
Christmas cards
The cost of greeting and holiday cards is on the rise. A single card can cost anywhere from $2 to $5, not including postage. This adds up when sending out a lot of cards.
Holiday decorations
The Alliant Credit Union found that American consumers spent $227.26 on average for holiday decorations in 2019. This is in addition to the amount they spent on gifts and other holiday-related things.
Holiday parties and entertaining
Holiday parties and events cost additional money on things like food, drink, dishes, décor and entertainment.
The bottom line
The most wonderful time of year can also be the most expensive, but you don’t have to go into debt to have a great holiday. Use some of these tips for a frugal celebration this year, then buckle down on savings in January, so you’re ready to go when next year’s holiday season rolls around.
