The holiday season is a time for joy, celebration and connecting with loved ones. But for many, it also brings financial stress.
[READ: 10 Ways to Sidestep Holiday Financial Stress]
Americans are expected to spend an average of $1,014 on holiday gifts this year, according to Gallup. When you factor in all the travel, food, decor and miscellaneous expenses, the costs can be overwhelming — and leave many turning to credit.
But you can break the cycle. If the holidays tend to be hard on your finances, financial experts recommend starting a dedicated holiday savings account now for next year.
Prepare for the 2025 Holiday Season With a Dedicated Holiday Savings Account
Coming up with an extra $1,000 or more for the holidays can be difficult in November and December, but it’s much easier if you start saving way back in January.
“I recommend starting to save for the next big winter holiday season as soon as the current one is over. This kind of planning allows us to save in bite-sized pieces and make our goals more realistic,” Katherine S. Mielitz, accredited financial counselor and executive director of a personal financial program at Kansas State University, said in an email.
Clay Cary, a senior trends analyst at CouponFollow, agrees.
“By starting early, you’ll split the cost over a number of months, which can make a huge difference when the holidays come around. In addition, with a separate account, you’ll be sure not to mix your holiday funds with your regular savings or emergency funds,” he says.
How to Save for the 2025 Holiday Season Now
If you want to get a jumpstart on your 2025 holiday fund, these five steps can help.
1. Calculate Your Holiday Spending Goal
Start by figuring out how much you want to save overall. Consider your plans for next year’s holiday season.
For example, do you plan to travel, stay home or throw a party? Think it through and break down the costs. Then, make a list of all the people you plan to buy gifts for and estimate how much you’ll spend on each person.
“Your holiday spending amount may look a lot different if you’re planning an international holiday getaway or buying everyone in your extended family a gift, rather than if you decide to stay close to home and participate in a Pollyanna gift exchange,” Sabino Vargas, a certified financial planner and senior financial advisor at Vanguard, said an email.
If you aren’t sure about costs but plan to keep things similar to this holiday season, review this year’s expenditures.
“Include gifts, travel, decorations, food and all the other things you bought. Then bump it up by just a bit (10% to 15%) for unexpected expenses or inflation,” Cary says. If you spent $1,200 last year, for example, he recommends you should try to save $1,320 or so to be safe.
[READ: 6 Unforseen Expenses and How to Budget for Them]
Also, consider if you’re happy with the amount you spent this year.
“Evaluate how you feel about what you’re spending this year — is it right where you want to be? Too high? Too low? Use that to guide your savings goal for next year,” Mielitz said.
2. Set Smaller Savings Goals
Next, break your overall holiday savings goal down into smaller milestones.
“Divide the amount you’ve settled on for next winter by the number of paychecks you’ll get between the first pay period of the year and mid-November of next year,” Meilitz said.
For example, if you want to save $1,500 and have 23 pay periods through mid-November, your biweekly savings goal would be about $66.
If you get paid monthly, you can instead divide the overall holiday savings goal by 10 months and set a monthly savings goal. So, if you’re trying to save $1,500, you’d set a monthly goal of $150.
Plan to track your progress as you go and celebrate the growth each month.
3. Shop Around for an Account With a Competitive APY
While you could opt for any old savings account, you might as well get the best bang for your buck.
Shop around for a high-yield savings account with a competitive annual percentage yield (APY), no minimum balance requirements and no monthly or annual maintenance fees. Capital One’s 360 Performance Savings currently comes with a 3.90% APY and doesn’t require a minimum deposit or maintenance fees.
The higher the APY and the lower the costs, the more you’ll earn on your holiday savings as they sit in the account.
4. Automate Transfers to Savings
Once you know how much you want to save and where you want to keep it, automate the transfers to your savings account.
“Set up the direct deposit so that it’s out of sight and accumulating in an interest-bearing savings account,” Mielitz said.
Doing so can help to streamline the process, removing the chance that you’ll forget or be tempted to skip a transfer.
[Related:How to Automate Your Savings — And Why It’s a Good Idea]
5. Look For Opportunities to Boost Your Savings
You can also look for ways to boost your savings outside your normal income. Here are some ideas:
— Cash back rewards: “Make it a point to divert any cash back rewards or loyalty points from your daily expenses to your holiday savings account. Many retailers and financial institutions run these kinds of programs, and this is one good way to give your savings a lift,” Cary says.
— Round up: Some banks allow you to round up daily purchases and save the change. You can use those savings to hit your goals faster.
— Trim expenses: Review your budget to see if there’s anything you can trim. “Cut back on unnecessary spending (such as coffee runs) and reroute the funds into your holiday savings,” Cary says.
By starting a holiday savings plan early, you can stroll into the next holiday season stress-free and ready to enjoy the fruits of your labor. Plus, with these extra boosts, you could hit your goal ahead of schedule.
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Start a Dedicated Holiday Savings Fund Now for 2025 originally appeared on usnews.com
