While the holiday season doesn’t officially begin for a few more months, it is never a bad idea to start planning ahead. While the holidays are usually filled with joy, celebration, and gift-giving, it can also cause unwanted financial stress. Opening a holiday savings account is one way to avoid dipping into your regular savings account or wracking up credit card debt. By planning ahead, you’ll be able to find the best savings option for you and learn strategies to help you save for the holidays effectively.
What's on this page
What is a holiday savings account?
Simply put, a holiday savings account allows you to save money year-round for holiday shopping.
How does a holiday savings account work?
A holiday savings account, often called a Christmas Club savings account, is a specialized savings account offered by financial institutions like banks and credit unions to help people save for holiday-related expenses. These accounts typically do not require a minimum balance and may offer incentives such as competitive interest rates or rewards. These accounts are designed to encourage consistent deposits throughout your term length to help you save up enough money for the holidays.
Advantages of holiday savings accounts
Structured Savings: With a designated holiday savings account, you can set aside a fixed monthly amount. You can even set up automatic transfers and deposits.
Stress-Free Spending: A separate holiday fund will allow you to spend without worrying about dipping into your savings account or accumulating more credit card debt when the holiday season rolls around.
Potential Perks: Some banks and credit unions offer incentives for holiday savings account holders, such as higher interest rates, cash bonuses, and reduced fees. These perks also serve as a way to grow your holiday fund even faster.
How to save for the holidays
Review Past Holiday Spending: By reviewing your past holiday spending habits, you can set an informed savings goal.
Automate Savings: Setting up automatic transfers from your checking account, regular savings account, or your paycheck to your holiday savings account takes the guesswork out of savings and leaves less room for human error.
Cut Back on Non-Essential Purchases: Identify areas where you can reduce expenses. Sacrificing small or non-essential purchases throughout the year will pay off during the holiday season.
How much to save for the holidays
Set a Budget: Add up all previous holiday-related expenses, such as gifts, decorations, travel, activities, and entertainment. Based on this calculation, you can set a reasonable and realistic holiday savings goal. In the past, it was typically recommended to spend around 1% of your annual salary on holiday-related expenses. For example, if your annual salary is $70,000, you should plan to spend around $700.
Add a Buffer: Unexpected expenses and changes in plans are bound to happen. This is why it’s important to save slightly more than what you initially budgeted.
Certificates of deposit (CDs) and holiday savings
What is a certificate of deposit (CD)?: A certificate of deposit (CD) is a time-bound deposit where you agree not to access the funds for a specific period of time, otherwise known as the CD term. In return, you’ll earn a higher interest rate than you would with a regular savings account.
CD terms and holiday spending: When looking for the right CD, it’s important to consider when you are likely to do most of your holiday shopping. For example, if you plan to do most of your holiday shopping around Black Friday and Cyber Monday in November, you may consider opening a 3- or 4-month CD in July. This way, the funds will mature in time for your holiday shopping. A shorter term is also a great way to ensure you won’t incur any penalties for accessing your funds early.
Laddering CDs: This option allows you to both maximize returns and maintain accessibility. By dividing your holiday savings into smaller portions and investing in CDs with different maturity dates, you will be allowed access to some of your funds while benefiting from higher interest rates.
Deposit insurance: CDs offered by federally insured banks and credit unions (like all of those found on Raisin) are protected up to $250,000 per depositor, per institution.
High-yield savings and money market deposit accounts for holiday savings
What is a high-yield savings account or money market deposit account? High-yield savings or money market deposit accounts offer competitive interest rates compared to regular savings accounts. These accounts allow your money to grow more rapidly over time.
Benefits of high-yield savings accounts: High-yield savings and money market deposit accounts are more flexible and accessible. Unlike CDs, high-yield accounts don’t have fixed terms. This allows you to access your money without penalties which is particularly useful when it comes to unexpected expenses.
Deposit insurance: High-yield savings and money market deposit accounts offered by federally insured banks and credit unions (like all of those found on Raisin) are protected up to $250,000 per depositor, per institution.
Whether you leverage holiday savings accounts or CDs with strategic terms, you can avoid financial stress before and during the holiday season. Alternatively, high-yield savings or money market deposit accounts offer competitive rates while providing accessibility to your funds. By creating a savings plan, setting a budget, and automating contributions, you can enjoy a stress-free holiday season without compromising your financial health.
Selecting the right holiday savings account
Whether you’re looking to lock in a rate with a CD or are looking for the flexibility of a high-yield savings or money market deposit account, Raisin could be the perfect holiday savings platform for you.
With a single login, it’s easy to open accounts across our exclusive network of federally insured partner banks and credit unions, giving you unparalleled, secure access to rates and products. Want to save for a specific gift? Simply fund a new savings account or CD and watch the money grow at a competitive rate.
Ready to get started? Simply click below to view all of our current offers.