Christmas Bonus Money: To Save or Not to Save


an envelope with cash passing from one hand to another

When coming into extra money you didn’t expect, it’s easy to rationalize treating yourself. But is there a better course of action than that? 

Who doesn’t love free money? Okay, so nothing in life is free, but if you find yourself coming into money you didn’t expect, whether through holiday bonuses from work or a generous gift from a loved one, there are some serious considerations to make. 

While it’s unlikely any bump in pay you receive will be as exciting as the 2019 holiday bonuses given out by Maryland real estate company St. John Properties (which averaged $50,000 each across the company’s almost 200 employees), you can still use the extra money to start next year off right. Even if it feels like that money is burning a hole in your pocket, it’s important to think about the positive and life-changing impact it can have on your life.

Whether you decide to invest, pay down debts, grow your savings, or finally take that vacation you’ve been putting off, there is more than one way to take advantage of your Christmas bonus. Just like any other financial decision,there is no one answer, but we’ve come up with a few different options to give you some ideas:

Spend and save simultaneously

Mary Blum, a business analyst and founder of mocashforyou.com, suggests rewarding yourself reasonably for your hard work while simultaneously putting a good chunk of the money towards future goals. She cites the importance of happiness in addition to the security of investing or saving.

“Spend 10% on something you really want,” she said. “We all need positive feelings in our life, like a kid who got a present. Then get serious … If you have any credit card or other high-interest debt … pay it. Then add to your employer-matched savings like a 401(k). ”

For employees who don’t have retirement benefits, using savings or investment apps can help to put those holiday bonuses to work for them. Blum recommends an app like Acorns, a simple-to-use micro investment app that rounds up the cost of purchases you make and deposits your spare change into a simplified stock portfolio. 

Prepare for the future

Sometimes Christmas bonuses provide a terrific opportunity to grow emergency funds (or start them if you haven’t), especially if the money came as a surprise and wasn’t part of your regular budget. By allocating the money to a savings account or a place where it can build interest, you’ll be putting your best financial foot forward.

Financial freedom writer Daniella Flores, founder of Iliketodabble.com, has plans on how to use her year-end bonus from her software engineering day job:

“I want to apply half to our stock portfolio (outside of retirement accounts) and half to our high-yield savings account (that could apply to our upcoming more, future unforeseen vet costs, unforeseen health costs, etc.),” she said.

Not only is Flores saving her bonus, she’s also ensuring it will continue to grow and benefit her past the holiday season. By allowing the bonus money to increase in value, it will continue to give in a big way — much more than if it stayed in a stagnant low-yield savings account or in a place outside of the stock market. Bonus money has a lot of potential and can yield extra perks throughout a number of years — if you play your cards right.

Fund your goals

Goals don’t always have to fixate on reducing debt or even emergency planning. Sometimes goals are fun and simple — or, at least, that’s how Moriah Chace, founder of Our Table For Two, views bonus money opportunities. It’s a chance to save for something more than a crisis.

“We set up our life so that we can save, invest, and pay down debt with our W-2 income, and then anything extra (side-hustling, birthday money, etc.) goes into our goals category,” she said. “For a while, that meant general fun money, so we would go on dates and have adventures (that’s also how we funded two last minute flights and a week in Washington D.C.). Now we’re saving for a house, and so half of any extra money goes towards our house fund. The other half goes toward a fun adventure. I like the balance of that; we can still play while also boosting our bigger savings goals.”

Finance writer Bethany McCamish, and her partner follow a similar path for bonus money. Their funds go right to whatever goal they’re working on at the time. 

“Our current goal is paying off my student loans,” she said. “In the past we saved the money to use for renovating our fixer upper. I think what you do with a bonus depends on your goals, and if you don’t have any, it’s time to make some. The one thing we wouldn’t do is leave it sitting in a regular bank. At the very least, it’ll be in a high-yield savings account so it’s collecting some interest.”

Remember: Bonuses aren’t a guarantee

While bonus money can be a great benefit, it’s not always a sure thing. Various factors may influence whether or not you get one: from personal and company performance to the generosity of your employer. So before you start planning how to take advantage of your employer’s generosity, you may want to make sure you have the cash in hand. Who knows: You may be happily surprised.

Article contributors
Mary Blum

Mary Blum is a business analyst at a big name bank and professional financial risk manager. Her passion is helping people to save and make money using apps and online gigs.

Moriah Chace is the founder of personal finance website Our Table For Two. She started the site as a way to explore her own journey through the student loan process and now uses the platform to educate young professionals about money management and social impact. 

Daniella Flores

Daniella Flores is a 30-year-old software engineer by day and financial blogger/freelancer by night (and any other time of day). She and her wife Alexandra are currently working towards complete financial freedom and setting up a remote work lifestyle as they plan to move to the west coast with their 5 cats, 2 dogs, and a couple of tarantulas.

Bethany McCamish

Bethany McCamish is the writer and owner of His and Her FI, a Plutus award nominated personal finance blog and podcast. Her work has been published by The Financial Diet, Student Loan Planner, Saving for College and more. She writes most often about personal finance; mindfulness; and the way people live, work, and play. 

The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.