Holiday Shopping on a Budget: How to Plan Now and Stress Less Later
For many, the holidays are a time of joy: shopping for gifts, decorating, festive meals, and reconnecting with loved ones. But every year, a significant number of people unwrap their gifts, and discover they’re also carrying a hefty credit-card bill into the New Year. In fact, among Canadians who shopped last holiday season; according to NerdWallet, more than half (56 %) used a credit card for gifts. Even more troubling: 28 % of those shoppers say they’re still paying off last year’s holiday spending.
That means many households start the new year under financial pressure, still servicing December’s gift purchases, often with high interest rates, instead of saving or investing. In a broader North American context, a recent cnbc.com survey of U.S. consumers found that 36 % took on debt for holiday purchases, with the average debt load clocking in at US$1,181.
It’s not just the amount that is important, it’s the lingering impact. Among those in debt, 60 % reported feeling stressed about it, 42 % regretted how much they spent, and 21 % expected it would take five months or more to pay it off. (Source: LendingTree)
With inflation still squeezing household budgets and overall debt levels rising among Canadians, this is more than a seasonal problem, it can derail your broader financial goals and add stress long after the last gift is unwrapped.
So how do you avoid becoming one of those statistics, yet still enjoy a generous, festive holiday season? The answer many experts recommend is simple (but powerful): a sinking fund.
What Is a Sinking Fund, and Why It Works
A sinking fund is a dedicated savings pool you build over time, with the express purpose of covering a planned expense when it comes due. Unlike credit-card borrowing, you’re not paying interest, and you avoid the year-end “debt hangover.”
For holiday shopping, this means setting aside a little money every month (or every paycheque) over the course of the year, instead of trying to cover an expensive holiday all at once.
The power of a sinking fund lies in three things:
Planning ahead: you know roughly how much you need before the gift-buying season hits.
Spreading the cost: small amounts saved regularly are often easier to handle than a big lump sum at once.
Avoiding interest & stress: since you pay with cash (from your sinking fund), you sidestep credit-card debt, interest charges, and post-holiday financial guilt.
Step-by-Step: Building a Holiday Sinking Fund
Here’s a practical guide to setting up your own holiday sinking fund to make your next festive season smoother and stress-free.
1. Estimate Your Holiday Costs
Start by listing everything you expect to spend this holiday season. Think:
Gifts for friends, family, coworkers
Holiday meals and entertaining
Decorations and/or seasonal décor
Travel, visits, and/or holiday activities
Miscellaneous holiday–related expenses (wrapping paper, shipping, donations, etc.)
Add them up for a rough “holiday total.”
Example: Maybe you expect to purchase gifts for five people, plus holiday dinner, travel to see family, and décor, you estimate needing about $800 in total.
2. Choose a Target Date
When will you need the money? If your main holiday shopping is done by mid-November or early December, then count backwards from that date to figure out how many months you have to save.
For example, if it's January and you’re planning for December, you have 11–12 months to save up the funds.
3. Do the Math: Monthly Savings Target
Use this formula:
Holiday Total ÷ Months Until Holiday = Monthly Savings Amount
If you need $800 and have 12 months → save about $67/month
If you need $1,200 and have 12 months → save about $100/month
If your paycheque is bi-weekly or weekly, divide the monthly target accordingly so it feels manageable.
4. Separate the Money and Make It “Off-Limits”
Don’t just let the money sit in your checking account. Instead:
Open a dedicated savings account, or
Create a labelled sub-account (“Holiday Fund 2026”) in your savings, or
Use a digital budgeting tool with a “bucket” / “envelope” feature to reserve the money
This way the funds don’t get spent accidentally.
5. Automate the Transfers
Set up an automatic transfer from your main account to the sinking fund each payday or monthly. Treat it like a recurring “bill”, out of sight, out of mind.
6. Track & Adjust, Then Reassess as Needed
If prices rise (gifts, travel, food), consider increasing your monthly savings slightly.
If you anticipate a bonus, tax refund, or extra income, that would be a great time to consider adding a lump sum to the sinking fund (along with investing or paying down a debt!)
If circumstances change (job, expenses, priorities), adjust the plan.
Staying flexible keeps the sinking fund realistic and stress-free.
Why a Sinking Fund Is a Smart Move
Recent data from NerdWallet shows many Canadians are carrying credit-card debt into the new year: among 2024’s shoppers, 28 % still owe on holiday spending.
According to a 2025 survey, 64 % of Canadians start the holiday season already carrying some kind of debt , and a significant portion expects that debt will limit their spending. (Source: Business Wire)
With inflation, rising living costs, and record-high credit balances nationally, the risk of compounding debt is real.
In short: the financial environment is tougher than ever. Yet with a sinking fund, you reclaim control. You can still enjoy the spirit of holiday spending, giving thoughtful gifts, celebrating with loved ones, without compromising next year’s budget, your savings, or your financial peace of mind.
The Bottom Line
The holidays don’t have to be a source of financial regret. By planning ahead, estimating realistically, and using a sinking fund strategy, you can enjoy generosity, and still enter the new year with a clean slate.
Whether you’re a parent buying gifts for children, someone trying to keep holiday costs under control, or just tired of carrying holiday debt year after year, a sinking fund can make a real difference.