Christmas is an expensive time of year for those who celebrate it, as consumers are encouraged to splash out on presents, food, drink, and much more.
The increased commercialisation of the festive season means household spending increases in December, leaving a third of Britons “fairly worried” about the impact of the festival on their personal finances according to a recent poll by YouGov.
This concern won’t come as a surprise – while borrowers and chancellor Rachel Reeves got an early present in the form of an interest rate cut by the Bank of England, it’s not all merry and bright in the economy.
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Economic growth is slowing, unemployment is at an almost five year high of 5.1%, and high inflation in the UK in 2025 has slowly made the pound in your pocket worth less.
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One of the many knock-on effects of this is that your Christmas dinner will now cost you about 4% more than it did last year, according to the BBC, as a typical turkey dinner with all the trimmings will cost about £32.45.
The average UK household will spend around £1,015 on Christmas throughout December, according to research by Zopa Bank. The Bank of England estimated this in 2024 to be slightly lower, at an average of £713.
While some households will be happy to splash out on Christmas spending, it may not be worth it for others. Instead, it could be a better long-term decision to put some of the money you were going to spend into a stocks and shares ISA.
Yes, you might be called a Scrooge. But with the power of compounding, over years or decades, that money could become very significant.
We look at how much you could be missing out on by spending big at Christmas. Or, in more festive terms, we look at whether you’re being haunted by the (financial) ghost of Christmas past.
Smaller Christmas cutbacks
With an overall Christmas bill of around £1,000, there is ample room to find places where you could cut back on spending.
Laura Suter, director of personal finance at AJ Bell, told MoneyWeek: “Rather than scouring websites and shops for presents each year, if you opted to invest that present money into the stock market each year instead, you could end up with a pot worth tens of thousands in the long run.
“Even small amounts each year have the potential to deliver a much more attractive gift in the form of a healthy portfolio after 20 years.”
Data analysed for MoneyWeek by AJ Bell shows that if you invested £100 a year, you could be thousands of pounds richer over the course of 21 years.
Assuming you had invested the £100 into the MSCI World index on 1 December 2004 and topped it up every year with an extra £100, you would have £8,720.16 by December 2025.
Investing this money in a well-balanced portfolio means you will have more than quadrupled the £2,100 that you put in.
Meanwhile, if you had invested £200 every December over the same time frame, you would have a portfolio worth £17,440.31.
Past performance does not guarantee future returns, and the value of your investments can go down as well as up. We delve more into the basics of investing in our article ‘How to start investing: a beginner’s guide’.
How much a frugal Christmas could save you
Having established how regularly investing over a long period of time can bring you strong returns, you may be wondering how much you could have if you made more significant cutbacks – such as by cutting down on the number of gifts you give or adopting a “secret Santa” approach.
If you could find savings of £500 during the Christmas season by being a little more frugal and investing it instead, you could see even more dramatic gains over the long term.
Assuming you had invested £500 every December into the MSCI World index from 2004 to 2025, you would now find yourself with a portfolio worth £43,600.78, having put in £10,500.
If you want to keep the spirit of giving alive, a portfolio worth this much could be extremely valuable to your child when they come of age, providing more than enough for a deposit on an average home.
Focusing just on the things that matter most at Christmas
Some people argue that Christmas has become far too commercialised in recent decades, with the festival moving on from its origins. This view is shared by around 21% of Brits, according to YouGov.
For many, the true meaning of Christmas is spending time with your loved ones – something that need not cost a penny.
Indeed, over the long-term, adopting this approach could mean you are much better off, as the money you save by having a minimal Christmas grows and your returns compound.
Assuming that you spend just £100 on Christmas – perhaps on a train fare back home, or on ingredients for a family dinner – you could be saving around £900 which would have otherwise been spent on presents, decorations, and other knickknacks.
A £900 saving by itself is nothing to be scoffed at, but it becomes an even more significant saving as years of a more minimal Christmas add up.
According to AJ Bell’s data, a £900 investment each December in the MSCI World index from 2004 to 2025 would have provided a portfolio worth £78,481.40 – over four times more than the £18,900 you put in.
The sum goes to show how powerful investing can be in building your long-term wealth, even if the amount that you invest every year is relatively small.
Suter said: “The key is to invest as much as you are able to set aside as often as you can. If you do that over a number of years chances are you’ll have made a healthy profit that beats a lot of cash accounts on the market over the long term.”
