Last night, one of my coworkers and I were chatting about money management while on our break. She mentioned that after last Christmas, she’s come up with a way to keep Christmas shopping from eating up her December paycheck. She’s been doing it since July.
Every two weeks, when her paycheck arrives, she’ll buy one Christmas present. Once, when the present in mind was more expensive, she put half its cost aside from her first paycheck and half from the second. I think it’s a brilliant strategy. Here are two others:
Christmas Savings Account
Another way to prepare for December is opening an ING Direct savings sub account. I’m not entirely sure what’s “sub” about them, but what matters is that you can open a number of savings accounts containing very small sums. And you can set up automatic transfers of $X into them every week, month, whatever. If you put in $10/week for a year, that should give you around $500 for Christmas.
Need more? Adjust the amount to fit what you plan to spend. Put in bits of any windfalls you receive. You’ll even get a nice little treat of monthly interest.
You can do this with many banks, but a number require higher opening balances and the like, so make sure you find something like ING Direct. ING doesn’t require a minimum balance.
Christmas Club Account
If you want to stick with your local bank, see if they have a Christmas club program. The original idea of these programs was to get people saving. If the money was marked for Christmas, perhaps they wouldn’t spend it on anything else and find themselves lacking again at Christmas.
It’s similar to the concept of retirement accounts or college savings accounts, to protect against mental accounting.
As with any savings account, you’ll want to check what fees would be associated with having a “Christmas club” account. They should allow for lower balances, but they may have more fees than your average savings account. If so, you’re probaby better off with another bank or with using my coworker’s method of spreading out your gift buying.
Advantages and Disadvantages
I see advantages & disadvantages to either approach.
Buying the gifts over time probably relieves the pressure of the Christmas buying season. The disadvantages are that you may a) misplace a present, b) come up with a “better” idea and fight a mental war with yourself over what to do next, or c) break up, stop being friends, whatever (so buy your sweetheart’s present near the end of it all!). But if things go well, it’s possible you’ll have all your Christmas shopping done before the rush starts and feel no pain in your wallet.
While the Christmas saving account/club seems like a sure bet, you may a) stop putting money in it, b) underestimate what you’re going to spend, c) use the money for something else, or d) that you lose some of the money to banking fees. But you won’t have to worry as much about misplacing presents, getting better ideas, or buying a gift for someone you’re no longer with. If the latter two happen, you should still be within the period where you can return the gift with a receipt.
Either way, what matters is that you prepare. Or that you don’t give purchased presents at all.