Get Christmas for crackers – act now

If you are still counting the cost of Christmas, it’s time to get serious, writes Sophie Elsworth

THERE’S a good chance you’ve blown the Christmas budget and rolled into the new year with a big chunk of debt to pay back.

Finance experts say it’s often not until next December the festive season is given some serious thought again – but this needs to change.

Now is the best time to put yourself in prime position for next Christmas by setting up a good savings plan so you won’t be left with another hole in your pocket at the end of the year.

Christmas Club accounts – once a popular savings account that was never to be touched until at least November – have slowly disappeared , but setting up a separate online savings account just for Christmas is easy to do.

Data from financial services firm Canstar shows that based on a $2000 balance – the typical amount Aussies spend at Christmas – tucking money away in an online savings account is best.

The site’s spokeswoman Belinda Williamson said some accounts have interest rates of up to 3 per cent, compared with Christmas Club accounts which have a maximum rate of 2 per cent.

“Christmas club accounts are inferior to the other savings options in terms of the rate of return,’’ she said.

Regular savings accounts and savings accounts with bonus conditions pay a higher average rate but they are “at-call” accounts, which means you can access the money at any time, unlike Christmas club accounts, notice savers and term deposits, which can have strict conditions.

This means you need to have restraint not to dip into the funds throughout the year.

Finance expert Lisa Montgomery urges people to set up a savings plan now and then simply “set and forget.”

“It’s never too early to do this, now is the best time to start because with transaction accounts you can often have side accounts where you can funnel money into that account,’’ she said. “Given we are living in this world of automatic transfers, having an automatic transfer going into a separate account is a really good thing to do.”

An easy way to work out how much money you need to set aside is by looking at what you spent last Christmas and dividing the amount by how frequently you get paid over 12 months and setting up a direct debit accordingly.

For example, if you spend $1500 this Christmas you should be setting aside $25 per week to have $1300 after 52 weeks of saving.

But be aware, restrictions do apply on some savings accounts – including depositing a minimum amount to ensure you get the highest interest rate possible.