How to Avoid Debt from Holiday Shopping

Key takeaways:

• Holiday expenses extend beyond gifts, so account for costs like travel, dining, hosting and decorations when building your budget.
• Breaking your holiday savings goal into smaller monthly amounts can make it easier to manage.
• Keeping holiday savings in a separate account can help you track your progress and avoid spending the money on everyday expenses.
• Digital tools like spending insights and account alerts can help you monitor holiday outlays and stay within your budget.

The holiday season is a time for celebration, but it often leads to a serious financial hangover.

In fact, 43% of Americans say they’ve dipped into their emergency savings in the past to cover holiday expenses, according to The Penny Hoarder’s 2026 State of Holiday Spending report. With rising prices continuing to put pressure on household budgets, 77% say they plan to change their holiday gift-buying strategy in 2026.

Planning ahead can help keep seasonal expenses from disrupting the rest of your finances. By building a realistic holiday budget, saving toward it over time and tracking your spending along the way, you can reduce the need to rely on credit or pull money from other financial priorities.

Here’s how to set up a holiday savings plan—and stick to it once the shopping begins.

How to create a holiday budget

To create a Christmas savings plan that actually works, begin with what you can realistically afford without compromising your regular bills, emergency savings or long-term financial goals.

To get started, follow these three steps:

1. Review your recent spending and cash flow. Look at how much money is coming in, where it typically goes and how much you can redirect toward holiday expenses without falling short elsewhere.
2. Make a list of anticipated holiday expenses. Assign a spending limit to each category, including gifts, travel, hosting, decorations and events or activities.
3. Adjust the numbers. Refine your totals until the final sum fits comfortably within your overall budget. You can use Fifth Third’s budget savings calculator to help determine how much you need to set aside.

As you build your plan, consider these common holiday expenses:

How much money should you save for the holidays?

There is no single correct amount when it comes to holiday savings. The right number depends on your personal budget, current financial situation and holiday goals. Once you have your total holiday budget figured out, work backward based on the number of months left before you expect to start spending.

Here’s a simple way to do the math: Holiday savings goal ÷ number of months until holiday spending begins = monthly savings target.

For example, if you establish a total holiday budget of $800 and have four months to save, you will need to set aside $200 each month. Breaking the number down in this way can make a large, intimidating goal feel much more achievable.

How to save money for the holidays

Knowing your monthly savings target is one thing, but finding the cash is another. Start by reviewing your current expenses and identifying areas where you can temporarily and realistically reduce your spending.

For example, you might cut back on dining out or takeout for a few months, pause subscriptions you aren’t using regularly or reduce other discretionary purchases. It’s not about eliminating everything you enjoy but finding expenses you’re comfortable cutting back on for a short period and redirecting that money toward the holidays.

A few other ways to build your holiday savings include:

• Save from every paycheck. Set aside a predetermined amount when you get paid rather than waiting to see what’s left at the end of the month.
• Use extra money strategically. Consider putting some of a work bonus, cash gift, tax refund or other windfall toward your holiday goal, provided doing so won’t take money away from emergency savings, debt payments or other financial priorities.
• Automate your savings. Set up recurring transfers so money moves into savings automatically on a schedule that works for your budget.

Should you open a holiday savings account?

Leaving your holiday savings in your everyday checking account can make it harder to distinguish money you’ve set aside from money that’s available for regular expenses. A separate savings account can create a clearer boundary between the two.

Keeping funds in a savings account, such as a Fifth Third Momentum^® Savings Account, gives your holiday savings the opportunity to earn interest while you work toward your goal. Fifth Third customers can also use Smart Savings to automatically set aside small amounts throughout the week—as little as $1 at a time—to work toward a weekly savings target.

The account lets you organize your savings into four goal categories, so you can set money aside for the holidays while continuing to save for other priorities and track your progress toward each goal.

How to stick to your budget

Saving the money is only half the battle. Sticking to your budget requires keeping your spending under control and within the limits you established.

Try these strategies to keep your holiday spending on track:

• Shop from a list. Create a gift or shopping list before you start buying and assign an amount to each person or purchase.
• Track purchases as you go. Keep a running total rather than waiting until after the holidays to add up your receipts.
• Use digital banking tools. Review spending insights in your Fifth Third Mobile App and set up account alerts online to help you monitor your spending and account activity.
• Rebalance when you overspend. If you go over budget on one item or category, look for another place to cut back rather than increasing your overall spending limit.

It can also help to build a small cushion into your holiday budget for unexpected or last-minute expenses. An unplanned gift, higher-than-expected travel cost or extra event can push you beyond your limit. If you don’t end up needing the cushion, the money can stay in savings for another goal.

Here are several questions to ask yourself before you swipe your card:

4 tips to reduce holiday spending

If your savings target feels out of reach, reducing your planned holiday spending can help close the gap. A few thoughtful changes can help lower your costs without sacrificing the festive spirit of the season.

1. Set gift limits. Have an open conversation with friends and family about setting a clear spending cap per person.
2. Try a group gift exchange. Instead of buying a gift for everyone, suggest a Secret Santa, White Elephant or other gift exchange so each person needs to buy only one gift.
3. Compare prices. Plan purchases around major sales events like Black Friday or Cyber Monday when it makes sense. Compare prices across retailers and look for legitimate discounts before buying.
4. Prioritize low-cost gifts or experiences. Get creative with handmade keepsakes, DIY projects or low-cost outings like a winter hike.

In the end, a little planning can go a long way toward keeping holiday spending from turning into debt. Set a realistic budget, start saving as early as you can and track your spending along the way so you can enjoy the season without losing sight of your other financial priorities.