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.

November 2, 2022

Christmas is a time for family and giving, but it's also a time when many fall into debt. According to a CNBC report, 36% of shoppers took on an average of $1,249 in credit card debt during the 2021 holiday season. Even more troubling, 82% said they wouldn’t be able to pay off that debt within a month, meaning they would rack up high credit card interest charges. 

Instead of going into debt for the holidays, consider making 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. 

A 3-step Christmas savings plan

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

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

1. Find or create 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, which can lead you to overcharging your credit card.

Examine your monthly budget to determine if there is any surplus cash you can 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. Meal planning can help you save money at the grocery store and avoid eating out as frequently.

If you can't trim expenses, you can make some extra money to fund your Christmas savings plan with a part-time side hustle.

2. Create your Christmas budget and savings goal

You can now determine what your Christmas budget will be. 

One way to do this is by taking the extra money you can set aside 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). 

Of course, your finances can fluctuate month to month. Sometimes, you may be able to set more money aside. Other months, your personal finances may not allow you to save anything at all. If you set a savings goal of $600, keeping that figure in mind can help you steadily save toward that goal, even if you can’t always put aside as much extra money as you want.

Another way to create a Christmas budget is to look at how much you spent on your gift list last year. Knowing how much money you’ve spent in the past can help you set a savings goal for next year. Or, you might recognize ways to reduce how much you spend on Christmas gifts.


3. Open 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 the cash for the holiday season and earn a little interest along the way. Even a small amount of interest earnings will give you a few more dollars that can go toward your gift list.

If your bank offers it, you can set up automatic transfers from your checking account 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 manually. You can set a reminder on your calendar so you don’t forget.

Some community banks and credit unions offer what is known as 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. 

5 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 your gift-giving budget. These tips will help you make the most of your Christmas spending. 

1. Use 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 cash back at the types of stores you plan to shop at and use it to buy your Christmas gifts. Some credit card rewards programs also offer gift cards you can use at stores where you do your holiday shopping.

Once the credit card bill arrives, you can pay it off before the due date using the cash in your Christmas savings. When you pay it off within the interest grace period, you won’t pay interest and will receive rewards points. 

2. Buy Christmas gifts throughout the year

Sure, you can get some great deals near the holidays, especially during Black Friday and Cyber Monday — but there are other 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 without putting the charges on your credit card all at once. As an added bonus, you avoid the seasonal rush and last-minute shoppers by getting most of your holiday gift shopping done early. 

3. Buy discounted gift cards

Some friends or family members may prefer gift cards so they can pick out what they want. 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 person on your list.

4. Print your own Christmas cards

If you've got a long list of family and friends, buying professionally designed holiday cards can become a hefty Christmas expense. Instead of buying them, look online for free printable Christmas cards and print them yourself. 

You can also save money by taking photos on your own, rather than hiring a professional photographer for your Christmas card picture. Have a friend or neighbor take pictures using your smartphone. Most phone cameras can produce high-quality pictures that you can use for your card.

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

5. Make DIY gifts

If you have the creativity bug this year, you can tighten up your holiday expenses by making 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 for family members. 

Some DIY gift ideas for the Christmas season include:

  • Sugar scrubs

  • Bath bombs

  • Clothing

  • Picture frames

  • Baskets

  • Jewelry

Use a Christmas savings plan to stay out of debt

Christmas debt can create lasting financial stress, but there is a way to prevent falling into this trap. A Christmas savings plan sets you up so you can pay with 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 a rewards or 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. You can also buy gifts throughout the year or even create DIY gifts and cards to stretch your budget.

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

To 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. Annual fees range from $0 - $300.