Money Advice Service

It’s a good idea to save ahead for Christmas. Dedicated Christmas savings schemes can help you to avoid dipping into your cash too early and make sure you have enough money up-front to pay for gifts, food and drink. But there are other ways to save too. Read our guide to the best ways to avoid New Year financial hangovers.

Christmas clubs

Christmas clubs are one way to save for Christmas. Most schemes work in a similar way.

You start saving early in the year and put aside a regular amount each month.

You can’t get at your money until a few weeks before Christmas when you should have built up enough savings to pay for the costs of Christmas, leaving you debt free in January.

With most schemes, you don’t usually get the cash to spend as you want.

You might have to exchange your savings for shopping vouchers or gift cards at major retailers.

With other schemes, you have to buy gifts, goods and services direct through the club.

Who offers Christmas clubs?

There are lots of Christmas clubs around.

You can save through:

  • Employers
  • Local Shops
  • Social Clubs
  • The Post Office
  • National retailers
  • Community groups, or
  • Christmas club companies

What are the benefits of joining a Christmas club?

  • There is no temptation to dip into your savings early.
  • Your money is locked in until the release date, a few weeks before Christmas.
  • You can save small amounts and you might prefer to save locally.
  • Buying direct from the club or getting gift cards can take the stress out of Christmas shopping.

What to think about before you join a Christmas club

  • You don’t get any interest on your savings.
  • You can’t get at your money during the year. Although this can be a benefit, if this is your only way of getting emergency cash, it might be better to save in other ways.
  • You are tied to buying through certain retailers. Or you might only be able to buy the gifts and services offered by the club.
  • You can’t take advantage of savings or deals that might come up during the year because your money is locked away.

Are Christmas savings clubs safe and secure?

Christmas savings clubs and schemes are not regulated by the Financial Conduct Authority.

That means you can’t take complaints to the Financial Ombudsman Service, nor can you get money from the Financial Services Compensation Scheme if your Christmas savings provider goes bust.

Some Christmas savings clubs are members of the Christmas Prepayment Association (CPA).

hey have developed a code of practice for the industry.

This includes rules about how their members must look after your money once you’ve handed it over and how they must advertise their schemes to make sure they are not misleading.

They also offer a conciliation service if you have a complaint about one of their members.

Before you join a Christmas club, it’s worth checking that it’s a member of the CPA so that you will have some protection if things go wrong.

Check if the Christmas club is a member of the CPA on the Christmas Prepayment Association website

Other ways to save for Christmas

Christmas clubs aren’t the only way to save for Christmas.

It’s a good idea to compare what Christmas clubs offer with:

  • Cash ISAs
  • Credit unions
  • Supermarket savings schemes
  • Bank and building savings accounts.

Credit unions

You could consider saving through a credit union.

There might be a branch in your local community or your employer or Trade Union might offer one.

Some credit unions offer Christmas club savings schemes that work in the same way as other Christmas clubs.

You start to save regular amounts early in the year and your money is locked away until a few weeks before Christmas.

What are the benefits of joining a credit union Christmas club?

  • You should earn money on your savings with a dividend that rewards you for being a loyal saver.
  • Your savings are protected by the Financial Services Compensation Scheme, so you’d get your money back if the club went bust.
  • You might be able to take out a credit union loan at a reasonable interest rate if you face an unexpected purchase or a financial emergency and keep your Christmas savings safe.
  • You are free to spend the money on what you want so you can take advantage of seasonal discounts and deals.

What to think about before you join a credit union

  • There might not be a credit union near to where you live or work.
  • You might have to prove your local connection to the credit union to become a member.

Find out how you can save with a Credit union.

Bank and building society savings accounts

If you save for Christmas in a bank or building society savings account, your savings will earn interest and your money is protected by the Financial Services Compensation Scheme.

There are lots of different savings accounts on offer, so it’s worth doing some research to find out what works best for you.

What to think about before you open a savings account

  • Most savings accounts offer interest but you need to compare rates to get the best deal.
  • Only choose an instant or easy access account if you’re not tempted to dip into your cash before Christmas.
  • Regular savings accounts might offer a better rate of interest. However, you might have to lock in your money for a year and commit to saving a minimum fixed sum each month.
  • You’ll need to check how much notice you have to give before you can get at your money.
  • A few building societies offer dedicated Christmas savings accounts. You can only open them early in the year and you can’t get at your money until a few weeks before Christmas. You should always compare the interest rates on a Christmas savings account with other types of savings account.

Find out how you can save with a Savings account.

Cash ISAs

Cash ISAs are also worth considering if you’re saving for Christmas or another big event.

You will be paid interest and all the money you earn on an ISA is tax free.

What to think about before you take out a cash ISA

  • There is a limit to the amount of money you can put in each tax year, which runs from April to April. However, this limit is generous and should easily cover the costs of Christmas and leave you with money to spare.
  • If you put in the maximum amount that you’re allowed to and then take money out to pay for Christmas, currently you can’t replace what you’ve taken out until your new tax free limit starts the following April. However, the government have announced a change in the ISA rules. From autumn 2015, you will be able to take money out of your ISA and deposit it back within the same tax year without it affecting your annual ISA allowance limit.
  • There are instant access and fixed term ISAs. If you choose a fixed term ISA, you lock your money away for a set amount of time. Make sure you can get your money out when you need it or you might be charged a penalty for drawing it out early.
Find out how you can save with a Cash ISA.

Supermarket savings schemes

Many supermarkets offer Christmas savings schemes.

Some allow you to save throughout the year using a saver card and offer extra bonuses if you top up the card with certain amounts.

Before Christmas, you can start to spend the money you’ve saved on the card.

Other schemes start in the weeks leading up to Christmas. You have to collect coupons when you do your weekly shop.

You’ll need to collect all the coupons to qualify for discount vouchers, which you can use to pay for your Christmas shopping.

What to think about before you join a supermarket savings scheme

  • Some of the bonuses offered could be better than the interest rates you might get in a savings account.
  • You might be able to take out more than one saver card and take advantage of multiple bonuses.
  • You are limited to shopping with the store you’ve been saving with and you might struggle to find everything you want to buy.
  • You might save more money by shopping around for better deals in other stores.

Christmas savings action plan

  • Start saving early in the year to build up your savings. Some schemes won’t let you join after a certain date.
  • If you might be tempted to spend your money during the year, look for an account that will lock your money away until you need it.
  • Always compare savings accounts that earn interest to make sure you’re getting the best deal.
  • If you use a notice savings account, check you’ll be able to get your money out in time for Christmas. If you don’t give enough notice, you might be charged a penalty.
  • If you save cash you’ll have more freedom to get the big discounts retailers offer on Pre-Christmas sales days such as Black Friday or Cyber Monday.
  • If you choose to save with a Christmas club check it is a member of the Christmas Prepayment Association.
  • Use our Christmas money planner to help create your own budget and see how much you can save in time for Christmas Day.

This article is provided by the Money Advice Service.