It is never too early to talk about saving for Christmas

It's way too early to talk about Christmas, right? Well, not if you are among those who fell into debt over it last year. After back-to-school costs are paid, there are just three more monthly pay cheques before what is the biggest shopping period of the year. At a time when money is tight for many, it pays to plan ahead.

A survey carried out by parenting website rollercoaster.ie last year found that one-third of respondents started their Christmas shopping in September. One in eight of them said Christmas would leave them in debt.

Retail Ireland estimates that Irish households spent an average of €2,800 in shops last December. That’s about €940 more than any other month of the year. Spending like that can impact the average family’s cash flow for several months after.

The most expensive home energy bills hit doormats in February, meaning some families are still feeling a Christmas pinch well into spring. Of course it’s summer now and the pain of looking for the price of a post-Christmas coffee down the back of the sofa is a distant memory. But facing down the ghosts of Christmases past can set you on a better course for this year.

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Do the maths

How many weeks are there until Christmas? It’s 20 weeks. Christmas shopping tends to start with Black Friday, which this year falls on November 27th, so that’s 16 weeks. Your family may not spend €940 this Christmas – you may spend way less or much more – but if you were to spend that amount, putting aside €59 a week between now and the end of November would see you covered.

That’s no small amount. Have a think about your likely needs – food, socialising and presents – and come up with a number. The sooner you start saving something, the less likely you are to incur debt.

If you haven't a snowball's chance in August of putting aside any money, or what you can afford to put aside won't meet your needs, then you have a choice, says Michelle O'Hara from the Money Advice and Budgeting Service (Mabs). "Either you cut the money you intend to spend, you dip into savings, or you may decide to borrow."

Saving Christmas

If you are one of those who managed to build up some lockdown savings, don’t leave them sloshing around in your current account. It’s a surefire way to lose them. Putting some in a separate account for Christmas could ease seasonal strain.

If you got a Covid-related rebate on your health or car insurance, or a refund on a flight or booking, you could earmark these too. If you are a commuter unlikely to return to the office this side of Christmas, cancelling your annual TaxSaver ticket makes sense. This can amount to more than €100 a month back on your pay cheque to be squirrelled away.

You’ll earn roughly a quarter of nothing by putting money on deposit between now and Christmas, but at least if it’s locked away in a separate account, you’re less likely to touch it. Many credit unions run special Christmas savings accounts where members can lodge a lump sum or regularly save money specifically for Christmas. Funds are then helpfully paid out to your desired account in mid-November.

Christmas savings clubs

You may well scoff at budgeting for Christmas in August, but those who swear by Christmas savings clubs have been at it since January. Christmas savings clubs are schemes where you pay cash in throughout the year. In return, you can order vouchers, gift cards or hampers to use at Christmas. These are usually to the value of the money you put in.

Big names include Park Christmas Savings and Christmas2u. Some find these schemes help with the discipline of saving but, unlike a normal savings account, your savings don't earn interest – back in the day when deposit accounts offered interest.

There are no specific legislative or regulatory requirements relating to group saving clubs, says the Central Bank of Ireland. If the savings club itself goes bust, unlike a credit union, your savings aren’t guaranteed.

If you’ve already signed up, read the small print. If your financial circumstances change and you can’t continue to pay into the scheme, there can be cancellation charges. In the case of Park Christmas Savings, the final order date for Christmas 2020 is September 1st. If you want to cancel an order after that, you will be charged 10 per cent of the order value, with a minimum €25 charge. If you change your mind about that hamper you ordered, you can’t cancel it after October 1st.

“The terms and conditions are different for each club,” says Michelle O’Hara. “Check if you are limited to where you can use and spend your money. If your savings club or voucher lets you purchase in a particular store only, and the same product is on sale for half price in another store, you lose out.”

If you opt to take a gift card, you may lose your cash if the retailer goes bust.

Turkey tokens

Nope, I’d never heard of Turkey tokens either, but they could save Christmas. If you earn reward points through your usual supermarket shop, keeping them for Christmas can pay. With SuperValu for example, you collect one point for every €1 spent. This converts into money-back vouchers three times a year, with one lot arriving at the start of December.

From about mid-October to mid-December, you can earn a Turkey token with each €1 spent in participating stores too. This goes towards a half-price turkey.

Tesco Clubcard members can opt to be Christmas Savers, which means you can opt to receive vouchers saved throughout the year at Christmas. So, if you have a supermarket loyalty card, don't forget to swipe it at the checkout every time, as the rewards may bring some cheer at Christmas.

Bonus

Some families rely on an annual work bonus to cover Christmas, but it may not be a sure thing this year. Employees have played a blinder during the pandemic. Thousands of businesses have stayed afloat because flexible staff have offered up their kitchen table as a branch office. Few have received recompense for rent, light, heat, phone, printing or cleaning costs.

The global pandemic represents one giant force majeure, where employees continued to work, many quadruple-jobbing as parents, carers and teachers too. Now that’s your argument for a company Christmas bonus. But some businesses have genuinely suffered and won’t be able to pay out; others may use the crisis as an excuse to shore up reserves.

Try not to build your spending plans on the basis of getting one. “Only include income that you are absolutely certain you will get before the Christmas holiday,” says O’Hara. Otherwise you may end up spending what you don’t have, or spending more than you need to.

Have the conversation

It'll be all over "in time for Christmas", Boris Johnson said a few weeks ago. But no one knows what Christmas is going to look like this year. The usual staples like a packed shopping street, Christmas parties, the panto, carolling, church services, travelling to see loved ones, are all up in the air. There is grave economic uncertainty, with much of the economic impact yet to play out. Many are fearful for their jobs or their businesses.

“Think about the clothes, food and gifts you are buying: are they really needed? Talk to your extended family and friends and see how they feel about exchanging gifts and what other options you may have,” says O’Hara. “Are there other ways to celebrate this occasion and maybe taking the time to be with those you love is all that is needed.”