“Start Saving Early: Best Accounts for 2024 Holiday Spending”

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High-Yield Savings Accounts

High-yield savings accounts typically offer much higher interest rates compared to regular savings accounts. As of November 2023, interest rates of 4% or even 5% were available, significantly higher than the average of under 0.5% for traditional savings accounts, according to the Federal Deposit Insurance Corp. (FDIC).

With high-yield savings accounts, you may need a minimum deposit or be limited to a certain number of withdrawals per month. However, if you are saving for the holidays, you should be depositing money, not withdrawing it.

For example, if you save $200 a month for 10 months at a 4.5% interest rate, you’ll have $2,041.72 at the end of 10 months. Higher savings goals and interest rates can net you even more.

Consider using a sinking fund or “bucket” to keep your holiday savings separate from other savings, ensuring you have it when you are ready to start shopping.

Pros:

• High interest rates
• Easily accessible
• Insured by the FDIC or National Credit Union Administration (NCUA)

Cons:

• Rates not guaranteed to stay at current elevated levels

Certificates of Deposit

Certificates of deposit (CDs) can be a good way to ensure any seed money—such as part of a year-end bonus—is saved for holiday spending. CDs differ from savings accounts in that withdrawals made before the CD has reached maturity often come with a penalty. However, you may be able to find one with a maturity period that suits your needs. For example, if you deposit a bonus in January, a nine-month CD would mature by October, just in time for holiday shopping.

Some banks and credit unions have minimum deposits for CDs, but not all do. A little research can pay off.

Pros:

• Guaranteed interest rate
• FDIC- or NCUA-insured

Cons:

• Penalty if money is withdrawn before maturity date
• Possible minimum deposit

Money Market Accounts

Money market accounts typically have limited check-writing and debit transactions but may pay higher interest rates than traditional savings or checking accounts. Some may have minimum deposits or monthly maintenance fees.

Note that money market funds are investment products and are not intended to be good short-term, accessible savings accounts.

Pros:

• Attractive interest rates
• FDIC- or NCUA-insured

Cons:

• May have minimum balance requirements
• Easily accessed if you are tempted to use the money for something else

Christmas Club Accounts

This option has declined in popularity but is still offered by many credit unions and banks. The idea is to put away a certain amount of money every month—often from a linked checking or savings account—and to get a deposit of the amount you saved, plus interest, in early November in time for the holidays. However, the interest amount is not typically competitive with what you’d get with a high-yield savings account, money market account, or CD.

Pros:

• Automatic transfers
• FDIC- or NCUA-insured

Cons:

• Usually non-competitive interest rates
• Possible fees for withdrawals between January and November

It’s Not Too Early to Start Saving for the 2024 Holidays

With the memory of 2023’s holiday budget and records of amounts spent in mind, you may want to do things differently in the future. Making a holiday budget now and saving early can help make next year’s holiday less stressful and more memorable. You can book travel knowing there is money in the bank and avoid last-minute cuts and compromises when money runs short.

Evaluate which dollars from the 2023 holidays felt like money well spent—which holiday gatherings brought joy and which ones felt like obligations you’d just as soon opt out of next time. This gives you an outline of how—and how much—you’ll want to spend, as well as some motivation to get started.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you with all your mortgage needs!

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