Saving for Christmas – alternatives to Christmas clubs
Have you bought all your presents for Christmas? How about the turkey? All those little extras that go towards making a Christmas to remember for all the right reasons? And most importantly, have you put the sprouts on yet?
It might be November, but that festive period is rapidly galloping towards us. Prudent celebrators will have already taken advantage of Black Friday' sales (not really a UK thing, but we seem to be adopting it nevertheless), special offers, and a high street that's currently desperate to separate savvy shoppers and their money.
The really smart Christmas consumers will have started saving already for next year's celebrations. Although the most commonly recognised way of saving for Christmas is through a Christmas club, there are other ways of spreading the cost not just over a year, but even longer. Putting money away into an account that can't simply be dipped into' is a great way of making sure you have a healthy kitty of cash for a special event. Here's a few different ways to save for Christmas.
Christmas Clubs
Christmas clubs are a form of saving scheme that you contribute to every week or every month, all through the year. Just before the big event, you can redeem your money in the form of high street vouchers, which you can then use to spread the cost of the season without trashing your credit card (and your credit rating) in the process. Christmas clubs are a great way to avoid an eye-wateringly big Visa or Mastercard bill in January.
You're not going to see any return on your savings other than the amount you put in, so don't expect to earn interest on your account. Bear in mind, too, that Christmas clubs are not regulated by the FCA, so you can't go to the Financial Ombudsman with a complaint if things go wrong.
Cash ISAs
Cash ISAs are a great way to save, regardless of the purposes for putting away a little bit of cash each month. Where they really take an advantage over Christmas Clubs is that you will earn interest on your investment.
Remember that there are two types of ISAs - fixed term and instant access. If you get a fixed term Cash ISAs then you won't be able to cash in your savings for a set amount of time. Instant access ISAs allow you to withdraw money, but there may be a penalty fee to pay.
Bank and Building Society Savings Accounts
Savings accounts are there for you to tuck a little bit away for a rainy day, the kid's college fund, some home improvements or, indeed, that big festive blow-out at the end of the year. Every bank offers something a little different, so it's best to shop around. You don't have to have a current account to apply for a bank or building society's savings account. You will get interest on your savings, but it won't be much, with most savings accounts offering an annual rate of barely 0.5% at best. However, your money is protected by the Financial Services Compensation Scheme, so if anything does happen to the bank then your savings are covered.
You may not be able to access your money for at least a year (or face a hefty early withdrawal fee) and you may be committed to paying in a certain amount each month. Some banks and building societies also offer Christmas Savings accounts, which are basic savings accounts but with a slightly more festive name.
With so many banks and building societies all vying for your custom, the best way to find out more is to use an online comparison site. They'll tell you whether or not you get penalised for early withdrawal (and how much it'll cost you), what rate of interest you'll get, and any other costs you might incur. Remember too that the interest rate will be linked to the Bank of England's base rate, so if it goes up (as we suspect it might next year), then the amount of interest you're paid will do too.
Your local supermarket
Many supermarkets (including some high-end stores) offer saving schemes that give you special offers and money off instore purchases. If you're planning to get all your food from one supermarket then these are a good way of making sure the Christmas Dinner doesn't cost a fortune, but probably won't be much use if you shop in several different stores.
No matter how you save for Christmas, spreading the cost over several months can really take the financial sting out of what is a very expensive season. If you're interested in longer term savings plans such as ISAs then talk to a financial expert who will be able to recommend schemes that will suit you.