The cheapest way to pay for Christmas is to start before December — and the tool that works best is also the simplest: a sinking fund, a small amount set aside regularly for a known future expense. Only 12 percent of shoppers surveyed for the 2026 season say they plan to use a sinking fund for holiday purchases, according to survey reporting by The Penny Hoarder. The rest rely mainly on current income at 48 percent, credit cards paid off each month at 14 percent, side hustles at 7 percent, credit cards paid over time at 6 percent, buy now, pay later at 4 percent, emergency funds at 2 percent and borrowing from family at 2 percent.
Why a sinking fund works
A sinking fund turns an emotional purchase into a controlled cash-flow decision, financial planners say. Decide a total seasonal limit first, then split it into category caps: gifts, travel, food, entertainment, donations, decorations and shipping. A holiday purchase is affordable only if it fits both December’s budget and January’s obligations — rent, utilities, debt payments, insurance, food and savings. The alternative is visible in last year’s numbers. According to LendingTree’s December 2025 survey, 37 percent of Americans took on holiday debt averaging $1,223 per person, and 63 percent of those who took on holiday debt expected it to take three months or more to repay. A separate survey found 36 percent of respondents were still carrying a balance from the prior year’s holiday shopping before the next season had even started. The pattern is familiar: last year’s holiday debt still carried into 2026 for many shoppers, and buy now, pay later holiday gifts can haunt January budgets.
Setting the budget this week
Start with last year’s total, not a wish list. If last year cost $800 and felt manageable, that is a better starting point than a round $1,000. Divide it by the weeks left until Christmas, set up a weekly transfer to a separate account or envelope, and track spending weekly against the total rather than once at month’s end. Talk with family and friends about spending expectations before exchanging gifts. Agreeing on a limit or drawing names can make celebrations more affordable for everyone — and it protects January, which is when the real cost of an unplanned December shows up.
