Skip to Content
Tally logo

Keep the Holidays Debt-Free With This Christmas Savings Plan

Are you dreaming of a debt-free Christmas? Make it a reality with a Christmas savings plan.

Justin Cupler

Contributing Writer at Tally

August 31, 2021

Christmas is a time for family and giving, but it's also a time to fall into debt. According to a MagnifyMoney survey, 31% of shoppers took on an average of $1,381 in credit card debt. That's an increase of 40% in just five years. 

Instead of going into debt for the holidays, consider a Christmas savings plan. This could give you the cash you need to buy gifts for friends and family members. 

Below, we'll cover how to create a Christmas savings plan and how to make the most of it so you don't just dream of a debt-free Christmas — you live it. 

Creating a Christmas savings plan

Setting up a Christmas savings plan helps you stay within a set budget for the holidays. Plus it allows you to slowly save throughout the year and avoid racking up credit card debt

Here are the steps to creating and executing your Christmas savings plan. 

1. Finding or creating a budget surplus

The first step in a Christmas savings plan is to find the extra cash needed to save throughout the year. This will allow you to look ahead and save toward the holidays instead of having them sneak up on you and result in you reaching for your credit card.

Examine your monthly budget and determine if there is any surplus cash to save toward Christmas. If not, see if you can trim any monthly expenses — like streaming services, cell phone plans, eating out and other flexible spending categories — to create a budget surplus. 

If you can't create savings through trimming expenses, you can always make money to fund your Christmas savings plan with a part-time side hustle.

2. Creating your Christmas budget

With your surplus cash in place, you can now determine what your Christmas budget will be. 

Take the extra money you have each month and multiply it by the number of months left until Christmas. The result is your Christmas budget.

For example, if it's January, and you have enough money to set aside $50 per month toward Christmas, your holiday budget would be $600 ($50 x 12). If it's July, your budget would be $250 ($50 x 5). 

3. Opening a separate savings account 

You’ll need a bank account to stash the cash you're saving for the holidays, so opening a separate high-yield savings account may be a good option. This will allow you to earmark this cash for the holiday season and earn a little interest along the way. 

4. Building your Christmas savings

If your bank offers it, you can set up automatic monthly transfers into the savings account and watch your Christmas savings grow. If your bank doesn't offer this, continue transferring your monthly Christmas savings into your savings account. 

Tips for stretching your Christmas savings

After budgeting for Christmas and starting to save money, it's time to focus on how to best stretch this budget. These tips will help you make the most of your Christmas spending. 

Using a cash-back credit card

Even though you'll have saved cash for holiday spending, this doesn't mean you can't enjoy the benefits of a rewards credit card. You can choose a credit card offering the highest reward or cashback in the types of stores you plan to Christmas shop in and use it to buy your Christmas gifts. 

Once the credit card bill arrives, you can pay it off before the due date using the cash in your Christmas savings. Because you'll pay it off within the interest grace period, you will pay no interest but still receive all your reward points. 

Buying Christmas gifts all year long

Sure, you can get some great deals near the holidays, especially during Black Friday and Cyber Monday, but there are more money-saving opportunities throughout the year. 

Shortly after holiday shopping ends, many retailers start to clear out the previous year's hot toys to make room for new stock, offering you big savings. There are also big sales at the end of each season. Plus, there are often great one-off deals on gifts during retailer holidays like Amazon Prime Day.  

Taking advantage of these sales throughout the year can help you get the gifts everyone wants while stretching that budget. Plus, you avoid the seasonal rush and all the last-minute shoppers by getting most of your holiday gift shopping done early. 

Buying discounted gift cards

Some pickier friends or family members may prefer gift cards instead of gifts. For these folks, you can buy discounted gift cards from various online sources, including eBay, Gift Card Granny, CardCash and more. 

This can save you money and satisfy even the pickiest gift receiver.

Printing your own Christmas cards

If you've got a large family, then buying Christmas cards can get rather pricey. Instead of buying them, look online for free printable Christmas cards and print them yourself. 

If you're exceptionally creative, you can always make your own cards and add a touch of individuality to them. 

Making your gifts

If you have the creativity bug this year, you can tighten up your holiday expenses by making your own Christmas gifts instead of buying them. Yes, you'll likely still have to buy some raw materials, but you can enjoy big holiday savings with DIY gifts. 

Some DIY gift ideas for the Christmas season include:

  • Sugar scrubs

  • Bath bombs

  • Clothing

  • Picture frames

  • Baskets

  • Jewelry

Considering a Christmas club

If you find it hard to save, you might want to join a Christmas club. These are special savings accounts designed around saving for the holiday season. You can set up automatic direct deposits from your paycheck, and they sometimes have a small interest yield, so your savings can grow. 

Like a Certificate of Deposit (CD) account, the cash in a Christmas club is only available without penalty at a certain time, typically right before the holidays. If you withdraw cash before the predetermined date, you may incur a penalty. 

Christmas clubs are generally only available at small community banks and some credit unions. 

Use a Christmas Savings Plan to Stay Out of Debt

Christmas debt has soared in the past five years, but there is a way to prevent falling into this trap. A Christmas savings plan sets you up to pay cash for all your gifts this holiday season. 

Building a Christmas savings plan requires a cash surplus in your monthly budget. This means you may need to trim your expenses or take on a side hustle. But enjoying a debt-free Christmas will make that extra sacrifice well worth it.

Of course, if you really want to stretch your savings, you can use rewards or a cash-back credit card to buy gifts, then use your savings to pay it off by the due date. This allows you to earn valuable rewards, like gift cards, vacation discounts, statement credits and more, without paying a cent of interest.

If you find yourself stuck in credit card debt, whether it’s from holiday shopping or any other reason, Tally can help. Tally’s app streamlines all your credit cards into one monthly payment and offers a lower-interest line of credit1 you can use to pay off your higher-interest credit card debt.

​​1To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate.