One financial guru uses this money hack to avoid credit card debt during the holidays

·2 min read

Rather than racking up debt at the end of the year, one financial expert said it’s best to cushion the blow of holiday shopping by saving up for it all year.

A sinking fund is like layaway, but instead of making incremental payments to a store, it’s “essentially a pot that you contribute small amounts towards over a longer period of time,” Vivian Tu, a financial literacy creator, recently told Yahoo Finance Live.

The financial hack is “super helpful,” she said, because “it lessens the burden of holiday shopping,” which totals around $1,000 per American for holiday gifts every year.

(Photo: Getty)
(Photo: Getty)

“Instead of going into credit card debt, or forgoing your own necessities during the holiday season, a sinking fund is a great way to save throughout the whole year for something that matters,” she said.

The method can be deployed in January or as the winter holidays get closer, but starting at the beginning of the year does provide the benefit of time.

“If you do the quick math, $1,000 over a whole year is only $2.75 a day,” she said. Tu explained that she starts saving in September and makes an effort to save $10 or $20 every week. Either timeline works because saving small amounts is “a lot easier than forking over $1,000 all at once.”

(Photo: Getty)
(Photo: Getty)

However, Tu encourages shoppers who have a healthy relationship with credit to game the credit card rewards and cashback system to maximize their dollars.

As for what Americans are writing on their wish lists, Tu said this holiday season is going to be all about gifting experiences since pandemic measures have relegated many to their homes.

Calling them practical gifts that “anybody in your life could appreciate,” Tu’s ideas include “a trip to the day spa or covering their next flight for their vacation or a night at a hotel for their next trip,” she said.

Stephanie is a reporter for Yahoo Money and Cashay, a new personal finance website. Follow her on Twitter @SJAsymkos.

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