Christmas cheer: Keep festive without dipping into your savings account

Christmas cheer Keep festive without dipping into your savings account

If the impending expense of Christmas has caught you by surprise, use our strategies to get through the festive season without maxing out your credit card or plundering your savings account. By Jackie Pearson.

November 16, 2009

I won’t tell you how many pay days are left until Christmas – rest assured, there are never enough! If you’re like me and can’t believe the shops are already decorating and stocking their shelves then you need to enamour yourself with some tactics for getting through the festivities, food and gift giving without breaking your budget

Step one: Set a budget
Yes, it’s boring, but it works. Figure out how many people you have to buy for and set a limit of how much you can realistically spend on each person.

Start by writing a list of all the people you give to. Don’t forget to include the kids’ teachers and colleagues. Are there any people you can trim off your gift list? If you have pages of names perhaps it’s time to hold a family meeting to consider changing the way you exchange gifts such as a “one big gift” rule or “Christmas Cringle”.

Step two: Go bargain hunting
Make the most of sales. This does take a bit of prior planning. Toy sales, for example, seem to happen mid-year.

Start paying attention to all those catalogues that come through the letter box to keep track of what’s on sale and compare prices. Consider using sites like ebay to find quality second-hand gifts.

Step three: Use lay-by
It’s old fashioned and some retailers no longer offer lay-by but it is one way to avoid using credit and still manage to get what you want. Most lay-by agreements are for six weeks, so you still have plenty of time to pay things off between now and Christmas.

You are usually required to leave a 10 percent deposit and make regular payments, and if you don’t pay the whole price within the agreement period the goods can be returned to the store and you can lose any payments you have made so you have to be certain you can meet your obligations under the agreement.

Step four: Pool your resources
If you know there is something your parents would really like or need for Christmas for example, consider sharing the expense of the gift with your siblings.

Step five: Don’t get caught out again
The best time to start planning for Christmas is January when everyone else is at the beach. Consider opening a special purpose savings account that’s dedicated to Christmas. Some credit unions still offer Christmas Club accounts. Remember to compare interest rates and fees before opening any new account.

Hit the post-Christmas sales to buy next year’s cards, gift wrap, decorations and gifts with a summer feel, that way in November, you can start to enjoy the festivities without the retail frenzy.


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Learn more about savings accounts

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.