Christmas Club Account Key to (Next Year's) Holiday Budget

If your holiday finances look anything like mine there are two things that became particularly worrisome right about the time the wrapping paper was being
ripped to reveal this year's Christmas gifts. How much did all this cost, and how can I do a better job of planning next year? I don't know why Christmas still ^takes me by surprise; after all it falls on the 25th of December every single year. Still, we tend to put off saving for Christmas and attempted to cash flow all the new gadgets from our regular November budget, usually unsuccessfully.

Christmas Club Accounts are the Answer
In the world of finance the highest yielding plans tend to be those that are the most automated. The benefits of dollar cost averaging investments into stocks and mutual funds have been well-documented. The benefits of regular savings contributions compounded over time are also a globally understood financial axiom. However, people tend to forget regular savings contributions are a powerful tool for annual events such as Christmas.

Breaking an annual expenditure down into manageable chunks makes it much easier to swallow when the due date rolls around, and will have much less impact on your overall financial well-being. Consider an average family's Christmas budget. The average family in the United States will spend around $700 this Christmas on gifts, trees, decorations, etc. To make the math a little cleaner let's assume your budget for next Christmas will be $720. To hit this goal most try to save $250 out of the three paychecks prior to Christmas Eve, much to the detriment of their regular monthly bills. In fact, most turn to credit cards running up debts that won't thaw out until well after spring arrives.

Engage Autopilot
To avoid future financial holiday meltdowns simply divide your projected annual Christmas expenses by 12 and set that money aside each month. Seems easy enough, doesn't it? Unfortunately, many of us lack the discipline to physically move $60 a month (using our $720 example) to a dedicated savings account, and that is where automatic investing can help.

Many credit unions offer a "Christmas Club" account where a specified amount is deducted from your checking account each month. In November, the proceeds of the account are mailed to you or transferred back to your checking account electronically to be used for Christmas shopping. If your bank or credit union doesn't offer this service you can effectively do this on your own by setting up a dedicated savings account and requesting an auto-draft from your primary checking account, or a payroll deduction directly to the savings account. Hurry, Christmas will be back before your know it and you don't want your Santa bag to be empty again.