I got my Holiday Club check in the mail a couple of weeks ago. You might know what I’m talking about – through my local bank I have an automatic transfer set up so that every time we get a paycheck, a small amount is transferred into our Club account. The year starts and ends in the middle of October, so that we have the money in hand to do holiday shopping.

When I first heard of this, I was pretty smug. I don’t need that, I thought. I’m very on top of my money. That’s for people who can’t manage their money. Until I realized: when those holiday bills came in in January, I was draining my savings to pay for them, and then working to build it back up. There was also no framework for how much we spent on gifts. That wasn’t good money management.

So I signed up for the Holiday Club several years ago. It’s a pretty minor thing in the grand scheme of my savings, but it perfectly demonstrates the beauty of slowly and steadily savings for a goal in advance. I get my check in October, and I can either use cash to shop, or use my credit card and pay off the balance in full. Because it’s a known amount, I can make a plan to spend only the amount I saved. And I emerge unscathed from those holiday bills – no more financial hangover. And then it starts again automatically without my doing anything.

This is a concept that lends itself beautifully to all kinds of shorter-term savings goals; travel is one that works particularly well. We tend to not save up for that kind of thing, which means that we’re often still paying for a trip after we’ve already gone on it. Setting up a bank account just for travel – you can nickname it “Belize” or “Safari” if that makes it more motivating – and consistently and automatically adding to it means that you’re spreading the cost of that trip over many months, rather than having to scrounge up money for airfare, then lodging, then car rental, all in a short period of time. I point out to my clients that putting aside $100 per pay period means that at the end of a year you have $2,600 saved, and $5,200 at the end of two years. It also gives you spending parameters if you have several out-of-town weddings to balance with a bigger vacation; it makes planning easier.

There’s one more thing I like about this savings method – for people like me who are thrifty and feel some guilt over spending money, even on things that will enrich our lives, it can be difficult to pull the trigger on an expensive vacation or a special gift for our children. With this method, we’re deciding ahead of time how important a savings goal is to us, and in making a plan to save on a monthly basis, it gives us permission to spend this money. It’s a lot harder to feel good about spending $5,000 out of a general savings account if you didn’t go through that conscious decision-making process.

Photo by Elena Mozhvilo on Unsplash