When I was a kid, my parents made sure I got whatever toy or game I wanted for the holidays. The minute I became obsessed with the Barbie Dreamhouse, my mom scoured the Toys R Us catalog to buy me one for Christmas. I was thrilled. But that was before I understood the concept of cost.
Now that I’m grown up and financially independent, I try to avoid the unreasonable gift and travel expectations of the commercial holidays. And my folks are equally thrilled to save money.
How much do people actually spend around the holidays? A November Gallup poll estimated that the average amount consumers planned to spend on holiday gifts in 2023 was $975, up more than $100 from the prior year. This holiday season, around a third of Americans went into debt even though a majority didn’t expect to, according to LendingTree.
The holidays weigh heavily on our bank accounts, and it’s becoming increasingly difficult to break the habit. But you can start gradually introducing new holiday traditions that emphasize saving over spending -- traditions that are lighter on the credit card but just as fulfilling.
How I saved money over the holidays
I’m not trying to be a Grinch who steals the joy out of Christmas. The holidays look different for everyone, and it might not seem obvious where you can cut back. But for my family, nothing really changed. We still celebrated what’s important to us. We just took the pressure off and gave it a smaller price tag.
As a present to myself, I opened a high-yield savings account with Ally and made my first deposit. Traditional savings accounts typically offer insignificant savings rates that contribute pennies to your balance annually. But the best high-yield savings accounts are currently offering annual percentage yields between 4% and 5%, which means I’ll actually see my savings grow each month -- and there’ll be more incentive to keep building my savings fund.
Here are some of the things I did to save money over the holidays. These tips are free.
1. Set a budget
Start by setting a budget and committing to it. Plan out how much you might need to spend on gifts, food and travel, and then think about where you have room to trim down your expenses. For example, I decided not to travel for the holidays this year, so I had extra cash to spend elsewhere.
If you want to track your expenses in one place, try a budgeting app or stick to the old-school pen-and-paper approach. Don’t forget to leave a little room for unexpected expenses so you aren’t surprised if you go over your budget.
2. Take on a side hustle
Having a side hustle doesn’t have to feel like an actual part-time job if you don’t want it to. While everyone else was taking vacations this year, I volunteered to watch their dogs, and it evolved into a legit side hustle. During the month of December, I made $1,000 by dog-sitting locally, all through word of mouth. If you need help getting started, consider signing up for a dog-walking app like Wag or Rover.
3. Use cash or debit instead of a credit card
Using your credit card for holiday gifts or travel allows you to take advantage of perks. If you have a rewards credit card, you can earn cash back, points or miles on every purchase. But try to only spend what you can afford to pay off immediately. If you go over your budget and spend more than what’s in your checking account, you’ll carry a balance and end up paying expensive interest charges.
That’s why, around the holidays, I often commit to paying only with cash or a debit card. Pulling the money directly from my wallet or checking account gives me a set limit based on my available funds. It also prevents that mental separation of buying from paying, which can trick our brains into overspending.
4. Use cash-back apps for the gifts you buy
Cash-back apps help you find discounts or get cash back in the form of a rebate every time you shop. They’re free to use and can be lucrative if you already know what items you want to buy.
Different cash-back apps partner with specific retailers and brands, so choose one that meets your shopping criteria. For example, if you’re traveling for the holidays, the app Dosh offers cash-back incentives for more than 600,000 hotels. But if you’re more interested in earning rewards for your holiday shopping, Ibotta partners with merchants such as Target, Whole Foods, Best Buy and eBay.
5. Stick to Secret Santa gift exchanges and potlucks
If you have a big family or a large friend group that gets together for the holidays, consider a Secret Santa gift exchange where everyone draws a name and is responsible for buying just one gift for one person. Set a reasonable spending limit so no one feels obligated to gift the iPod (check out The Office Christmas Party for reference). Buying gifts for everyone gets expensive, so this helps make the holidays more budget-friendly. Another option is to set a $10 or $15 cap for each family member. Trust me: No one will complain.
And if you love to host for the holidays, consider a potluck, where everyone can contribute something. This will save you money at the grocery store and give you extra time away from the kitchen to actually enjoy your company.
6. Give the gift of your time
Though I normally travel this time of year, it was far more pleasant (and far less stressful) to catch up with family and friends at home. My mom and I spent an entire afternoon baking cookies, and because we made way too many, we put together gift boxes for the neighbors. Quality time with my mom is something I can’t put a price tag on, and I also got a few homemade gifts out of it. Instead of traditional gift-giving, consider taking your partner or friend on a no-cost (or low-cost) adventure, or helping them with a task like painting, or purging their closet.
