Getting your finances ready for Christmas 2022

Christmas might be over for another year, but now is the perfect time to get a jump on saving for next Christmas.

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Sad Santa taking away a Christmas treeChristmas may be over, but it will come around again before you know it. We look at how saving now can save stress in before next year's festive season.

As always with Christmas, it’s good to get ahead of the game. December is usually a pricey month filled with entertaining family and friends, so saving money ahead of time is a good idea.

Here are some steps you can take to prepare your finances for next Christmas.

Budgeting for next Christmas

If you’re not already doing so, planning and budgeting can be a great way of setting money aside, as well as giving you greater control over your finances.

We have a free budget planner tool to help put you in control of your spending. You can keep track of your pay, benefits and regular outgoings all in one place, and you can save your budget plan and return to it at any time. 

Once you’ve compared the money coming in to what you want to spend, there are several ways that you can put together a budget. One of the most simple and effective ways is to use an “envelope” budget. This simply means separating your money out into pots, or envelopes, for spending on different things. For example, you can create a pot each for household bills, food shopping and rent or mortgage payments.

If you have money left over that you can afford to save, you could also create an extra pot for next year’s Christmas celebrations.  

For more budgeting tips and tricks, read our latest budgeting guide.

Find the best place for your money

Once you’ve worked out how much you can afford to put aside each month, you’ll want to think about the best place to keep that money safe. We’ve outlined some of your options below:

Savings accounts

One of the most common choices is to open a new savings account specifically for your Christmas cash. If you want to do this, it’s important to consider which type of savings account might work best for you.

For example, if you’re confident that you will not need to withdraw the money until next December, you may want to think about opening a regular savings account. 

These enable you to pay in a set amount of money each month over the course of a year, making them ideal for Christmas savings. You’ll usually need to leave your money untouched for those 12 months unless you want to pay a penalty to access your funds early. 

Regular savings accounts can also offer slightly better interest rates than easy access savings accounts. However, if you want to be able to keep your options open or make sure you can access your savings in an emergency, an easy access savings account may be the better choice. 

You can open many of these accounts with just £1 and add to your savings as and when you like. The downside is you won’t have the savings discipline you’ll get with a regular savings account, so you might want to set up a standing order to transfer a fixed amount from your current account to your savings account each month.

When shopping around for different savings accounts, ensure that the bank you’re thinking of using is covered by the Financial Services Compensation Scheme (FSCS). The FSCS protects your savings and provides you with compensation if your savings provider is unable to payout.

It covers up to £85,000 of any savings you hold in each official UK financial institution. There are a number of banking groups in the UK, but if you have less than £85,000 with any of them, all of your savings will be returned to you in the event of a bank or building society collapse.

Full details on how the FSCS works.

Compare the best savings account 

Christmas savings schemes

Another option is a Christmas savings scheme. There are a handful of savings “clubs” in the UK designed to help households save for Christmas. 

But before we go into how they work, a quick warning. Unlike savings accounts held with regulated financial institutions like banks and building societies, these savings clubs do not offer you financial protection in the event that the company you’re saving with goes bust. 

Well-known Christmas savings clubs like Park Christmas Savings and Variety Christmas Savings Club have said that they take measures to ensure your money is safe. But the truth is that if they go out of business, there is no guarantee that you’ll get your money back.

Sadly, this has happened before. Thousands of savers in a previous firm called Farepak lost money when the company went bust in 2006

The other thing to bear in mind is that, unlike a savings account, any money you deposit with a Christmas savings club does not typically earn any interest throughout the year.

How do Christmas Clubs work?

In return for regular monthly payments from the start of the year, Christmas Clubs offer savers vouchers to spend on food, drink and gifts in time for Christmas that same year.

The value of the vouchers will be broadly linked to the amount that the customer has paid in throughout the year. 

These firms say that they help families save for Christmas, but it’s worth noting that if you change your mind or simply need to withdraw your money to pay for more immediate costs earlier in the year, there can be hefty penalties.

So if you’re thinking about using one of these clubs to save towards next Christmas, make sure you read all the terms and conditions.

Credit union Christmas savings accounts

Credit unions are community savings and loans providers which operate on a not-for-profit basis and serve a group of members.

To join a credit union and get access to its services you need to share a characteristic with other members that makes you eligible. This could be living in a particular area or having a particular job. For example, NHS workers can join the NHS Credit Union.

Some also offer savings schemes designed to help members save for Christmas. Unlike money paid to the Christmas savings clubs described above, money saved with a credit union is FSCS-protected.

How do Credit Union Christmas savings accounts work?

Credit Union Christmas savings accounts allow you to pay in as much or as little as you like each week or each month. Your money is then locked in until November or December, so you won’t be able to access your funds before then without paying a penalty.

 While any interest you earn from one of these accounts might not necessarily be market-leading, these accounts can provide a great alternative to traditional high street banks or building societies for those looking to put money away. And remember, your money is protected under the FSCS.

For more information and to check if you’re eligible to join a credit union, search the Association of British Credit Unions’ Find Your Credit Union site.