Christmas Spending Boost

It's time to save for Christmas! Do so now and rather than the typical January groan of "I've no cash and can't take advantage of the cheap sales" you'll be quids in. Better still, there's a cunning way to ‘double-save' for 2009's festivities, potentially earning you up to 13% over the year!

• Ensure Christmas 2009 is a merry one
• What if I'm already in debt?
• Wasn't Farepak Christmas saving?
• The double-saving loophole
• Step 1: Simply save
• Step 2: Use supermarket savings stamps
• Using saving stamp schemes
• The Size Of The Saving
• Other Articles/Discuss

Be prepared for the big Christmas spend

Ensure Christmas 2009 is a merry one

Strangely, people always seem surprised by Christmas, as if it hid until winter then yelled, "Boo!" To avoid this seasonal spending shock, let me give you as big a warning as I can:

"On December 25th 2009 it'll be Christmas Day!"

The average spend on Christmas is reported to be over £800, but whatever you spend, it's always likely to be a stretch if it's paid purely from December's cash; even worse if it's whacked on a credit card, stretching debts into the New Year. Instead, simply put aside the money each month over the year (eg £800 is £67 a month) and it won't be such a hard hit on your pocket.

With forward thinking, and using the free Budget Planner tool to plan the year's expenditure, you can get a head start for what's to come, and earn interest rather than pay it.

What if I'm already in debt from last Christmas?

It's crucial to break the cycle. The golden rule is pay off debts before saving (see the Pay Off Debts With Savings guide). Plus, ensure your debts are as cheap as possible. Find the best Balance Transfers, take all the right MoneySaving measures (there are countless guides on this site to do it) and ensure you're on the weekly email list so you don't miss out on urgent savings.

Yet the real key is self discipline. It may mean that this Christmas can't be as expensive as previously. Remember the key Christmas question ISN'T, "I want to buy x, y and z this Christmas, what's the cheapest way?" BUT "What can I afford to spend on Christmas?", and then aim to have the best time possible on that amount of cash.

So this year take a deep breath and accept Christmas can't be as costly; and know that by doing this, future Christmas's should be better. Nearer December there'll be lots of tips on how to save; Christmas doesn't have to be as expensive as you think.

Wasn't Farepak Christmas saving?

Yes it was. It's very sad so many people lost out, though thankfully there were ways for some to get their cash back (see the Farepak Crisis guide) and, to be honest, I've been saying not to use hamper schemes for a long time.

The real problem wasn't 'saving for Christmas', it wasn't even the fact that hamper schemes aren't good value; it's that this type of saving doesn't have protection, unlike putting money in a savings account or cash ISA which is protected due to the Financial Services Compensation scheme (see the Safe Savings guide).

The double-saving loophole

In a nutshell, put your money in the best interest savings account for most of the year then, nearer Christmas, remove the cash and take advantage of a loophole in supermarket savings stamps schemes to get a big bonus on top.

Step 1: Save in the best account until Autumn

Put the money you want to save for Christmas each month into the best easily accessible savings vehicle available. A mini-cash ISA is the first place to try, as all it is, is simply a tax-free savings account you can put up to £3,600 in per tax year (6 April to 5 April). Read the top Cash ISA guide to find the best paying account.

The only reason not to use a Cash ISA is if your ISA allocation is already full up or is needed for share-based investments or longer term savings. In that case, simply utilise the best Saving Accounts instead.

Step 2: Boost your earnings with supermarket savings stamps

By putting the money in a cash ISA or top savings account you’ve earned as much as possible until this point. Now comes the loophole to boost the gain. At the right moment, depending on the supermarket's specific scheme, take the money and the interest out of your savings account and use it to buy supermarket saving stamps; time it right and these will give a bonus boost to your cash.

Using supermarket saving stamps

Many retailers promote Christmas savings stamp schemes where either electronic or real stamps are bought throughout the year to encourage saving for the eventual Christmas shopping spree.

Then, on a set date, usually between September and December, these retailers ‘generously' add a bonus, of up to 5% on top of what you've saved.

Purportedly, they do this to encourage savings; however it's actually a clever way to lock in your custom to that specific supermarket. After all, once you've bought the stamps you're stuck with them. Some retailers, such as Wilkinson, offer this type of scheme all year-round so there's no specific bonus date; you chose when you get the extra bounty.

What's the loophole?

A. There's nothing stopping you using your savings to buy all the stamps the day before the bonus date, still receiving the full bonus on the cash, even though it's only been in there a day. It's worked for the last few years and means you're effectively earning a year's interest on the money, even though you've only had the stamps for an extremely short time.

What's more, for hardcore MoneySavers, get a Cashback Credit Card and, depending on the retailer's terms and conditions, you could buy the stamps with it, earning up to 5% cashback on the amount you spend.

But remember to pay the card of IN FULL with the Christmas savings you've accumulated so you're not charged interest, as that'll wipe out all the savings you would've made.

And ensure you check with the card provider first to confirm that buying savings stamps or gift vouchers won't count as a 'cash transaction'. A small number of cards have been known to do this, charging interest on the transaction from day one, as if it was a cash withdrawal. If this is the case, avoid this extra technique and pay for the stamps directly with your savings.

Which supermarkets can this be done in?

A. Most supermarkets and some other stores offer stamps, though the bonus varies. For Christmas 2008 Wilkinson paid 5%, but a 4% bonus was paid at Asda, Iceland and Somerfield.

You must use those stamps in that supermarket though, so don't convert more money to stamps than you'll spend there. Having said that, these days you can buy a huge range of food, gifts, decorations and more in supermarkets at reasonable prices, and there's nothing stopping you using a combination of stamp schemes to increase your buying choice.

Is this guaranteed?

A. These schemes have allowed this loophole to happen for years, but of course there's always a chance they'll change the goal posts. If that happens, the worst case scenario is you'll have saved your money in the savings account and earned as much interest as you can anyway.

Yet it's important to understand that savings stamps schemes DO NOT have the same protection as savings in a bank (see the Safe Savings guide). So if you're considering using a savings club, similar to Farepak, be very cautious.

If you're planning to save up over a year, it's much better to use the top Savings Account or Cash ISA, both of which are fully protected.

And as this double-savings technique's about having a small amount of cash in a stamps scheme for just a couple of days, the risk's reduced. Plus the chance of a big supermarket going bust during that time is quite slim - though nothing's impossible.

But you must keep your card safe, as retailers don't keep a record of your savings. If you lose it, your money's gone.

Save £100 each month for Christmas in a standard, poorly paying savings account and you'd earn just 65p (before tax). Instead, use this ‘double-save' technique and you'd earn a lot more; £23, and get a bonus of up to £60 on top too. This is equivalent to earning around 13% on your savings for those starting in January.