Although it may not feel like it, the halfway point of the year is the perfect time to start thinking about the winter holidays, according to financial experts. Saving for holiday spending in June can help reduce the stress that comes with the season of giving. With a few tips and strategies, you can save enough for all your spending needs and avoid getting into debt. In this blog, we will cover ways you can save better now to ensure a less stressful holiday season later.
Budget for Holiday Spending
Revisiting your budget is a great place to start when planning for holiday costs. Evaluate your income and expenses to determine your savings potential. Compare that to how much you have already saved this year. Ideally, your budget will include money set aside for emergencies as well as for holiday spending. Identify what changes are needed in your budget to reach your savings goal.
For your holiday savings, you’ll want to get an idea of the amount of money you’ll need based on your gift list, travel, lodging, etc. Add up these expenses and the total is your savings goal for the rest of the year. Time is on your side and having a clear understanding of your target amount will help you save better.
Ways to Save
There are a few methods that you can use to save toward your goal. These include opening a separate savings account dedicated to your holiday spending, opening a high-yield savings account and putting in place automatic paycheck deductions that you can set and forget. Let’s review these ways to save and how you can use them to your advantage:
- Separate Savings Account: Opening a separate savings account for holiday expenses lets you keep money separate from your other savings, such as an emergency fund. This lets you accurately track your balance and lessens the chances those funds will be used for other purposes. You can open a savings account with your preferred financial institution or shop around for one. Be sure to check for any low-balance or monthly fees, minimum requirements, annual percentage yield (APY) and other features that come with savings accounts.
- Select a High-Yield Savings Account: To maximize your savings growth, select a high-yield savings account that pays a larger APY than regular savings. You’ll typically find higher yields with money market accounts and share certificates offered by credit unions. When selecting one, be sure you consider the minimum balance requirements, maintenance fees, accessibility of funds and any early withdrawal penalties.
- Automatic Deposits: No matter what type of holiday savings account you choose, be sure to set up automatic deposits to the account to make it easier to save. You can use direct deposit to have a portion of your paycheck, government payment or other regular source of income paid directly to your holiday savings account. Also, many online banking systems let you schedule automatic transfers from one account to another, such as from a checking to a savings account so you don’t have to worry making a trip to a branch to do it yourself.
Borrow Better
If you plan on financing your winter holiday expenses, this summer is still a good time to start thinking about the lending options available to you. The product you select matters because it could come with high interest rates, long terms and other requirements that make borrowing more expensive. Fortunately, there are several lending products you may choose from:
- Personal Loan: A personal loan is a good option if you want to borrow a set amount of money and pay it back within a set term with equal monthly payments. Personal loans come with fixed-interest rates, meaning the rate remains the same throughout the life of the loan. These loans are offered at financial institutions such as Travis Credit Union, as well as community banks. Shop for the best rate on a personal loan to save money.
- Credit Card: A credit card is another option, but they usually come with higher interest rates. It is important to know the credit card’s rate before you use it. Check with other credit card issuers to see if you can find one with a lower rate. For example, some may offer promotions that come with a zero interest rate for six months or a year. Other incentives include introductory offers, such as bonus reward points, cash incentives and other perks. Remember to stay within your budget when using credit cards. Avoid using your entire credit limit and pay down as much as possible to lessen the amount of interest owed.
- Home Equity: If you are a homeowner with equity in your home, you may consider a home equity loan or home equity line of credit (HELOC). These lending options usually have the lowest interest rates, so they are a smart option if you want to borrow for holiday expenses. Check with your mortgage lender first, then shop around to find the best rates.
Shop for Sales to Save
Another way to save money is to start shopping for gifts in the summer. According to Fidelity, take advantage of sales now and in the fall when items are easier to find. Compare prices and use online discounts, coupons and sales to check items off your shopping list. No matter if you shop online or in the store, having a list and sticking to it will help you keep holiday expenses within budget.
How Can TCU Help?
Travis Credit Union is focused on your financial wellness and can help you plan, save, spend and borrow better. TCU offers both money market accounts and share certificates that let you save for a goal. Travis also has several loan options, such as credit cards, personal loans, home equity lending and more. You can learn more about how TCU can help you at traviscu.org.
Saving for the holiday season in the summer is a smart move. Visit TCU’s Knowledge Base to access a full array of financial education courses online for free. Our Financial Wellness Blog also has great information, too.