Putting money aside for Christmas

We’d always encourage you to save a little during your debt solution if you can. Having a savings cushion to fall back on can help get through financially challenging times without falling behind on your bills, or needing to borrow again.

For many of us, that means doing our best to save up for Christmas. So what’s the best way to save? In today’s post we’ll run through your options.

Supermarket savings schemes

Asda, Co-op, Iceland, Morrisons and Tesco are among the supermarkets offering Christmas savings schemes. Some schemes involve saving all year round; others involve collecting coupons in the run-up to Christmas.

There are some drawbacks to these schemes. For one thing, you can only spend the money you save in that particular supermarket. And crucially, these schemes are not protected by the Financial Services Compensation Scheme (FSCS). This means if a company goes bust (which may seem unlikely with a large supermarket chain, but certainly isn’t impossible), you won’t get your money back, in the same way you would if you saved your money in the bank.

However, there are upsides. The schemes usually pay out a bonus if you save a certain amount – and the bonus is usually more than you would receive in interest if you saved the same amount of money in the bank. And unlike interest, the bonus is usually based on how much you’ve saved by a particular day. So you can reduce the risk of taking part in one of these schemes by waiting until the relevant date to pay your savings in.

Christmas clubs

These work in a similar way to the supermarket savings schemes – they’re not tied to a supermarket, but they usually involve saving, year-round, for purchases that can only be bought through the club. These might be toys, food and drink hampers, or vouchers for specific retailers.

You don’t receive any interest or bonuses on the amount you’ve saved, and you usually can’t take your money out of a Christmas club without paying a cancellation fee. And again, there’s no FSCS protection if a Christmas club scheme goes bust – which has happened in the past, for example with Farepak in 2006. However, there is a voluntary association of Christmas clubs, called the Christmas Prepayment Association (CPA), which does offer some protection. So if you’re thinking about joining a Christmas club, check the CPA website to see if the club you’re interested in is a member.

And check the club’s reviews from previous customers, too, to make sure the items available to purchase are of a good quality and value for money.

Credit union Christmas clubs

These are similar to other Christmas clubs but with a number of advantages: your savings will be protected by the FSCS; you’ll get access to your savings in cash, so you can spend it on whatever you want; and you should be paid a dividend on your savings too.

If you’re already a credit union member, get in touch and ask if they have a Christmas club. To look for credit unions you might be eligible to join, visit findyourcreditunion.co.uk.

Other ways to save

Your other options include a bank or building society savings account (some offer specific accounts for Christmas savings), or a cash ISA. All of these are protected by the FSCS and will pay some interest (although interest rates are very low at the moment).

Be sure you understand the terms and conditions of whichever savings option you choose – in particular, whether you’ll be able to take your money out if you need it. Part of the appeal of many Christmas accounts and schemes is that you can’t spend your money until it’s time for Christmas shopping – but if you don’t have any other savings, you might need to be able to access this cash in case of a rainy day, or for other occasions such as birthdays.

Whichever way you choose to save, the important thing is that you do it! Regular saving is a hugely important habit to maintain. And having that extra cash available when December rolls around will help you avoid struggling financially over the Christmas period or in January.

But remember, we’re always here to help – so if you do find yourself getting into more financial difficulty at Christmas, the New Year or any other time, get in touch and we’ll see what we can do.