Opening a Christmas Club and saving all year for Holiday spending used to be a popular way to have a (financially) low stress Christmas Season. Imagine how it must have felt when folks paid cash for everything and had no post-holiday debt!
While most banks discontinued offering Christmas Club savings accounts, many Credit Unions still have them.
The concept may seem old fashioned or dated, but if you want a way to avoid going into debt (or increaing existing debt) during what can be a very expensive time of year, this is a great way to go.
If you're planning to have an organized and debt free Christmas this year, check to see if your local credit union offers one of these savings accounts - or find one that does and open one!
Christmas Clubs were initially offered by banks during the Great Depression as a marketing tool to help bring customers back often. The concept is quite simple really. It's basically a special savings account that you deposit money into all year (or shorter if desired) and then take out and use for your Christmas-related spending. Once you take the money out of the account you can either close it or let the bank know you wish to restart it again after the Season.
Typically, Christmas accounts begin in January. If you're reading this now and it's later in the year, it's probably not too late to start one anyway - unless it's December of course! You'll need to do a little planning and calculating first but it will be so worth it come Christmas-time.
It's best to decide in advance how much you want to spend on the next Christmas season. Divide that amount by the number of months you have left to save and then deposit that fixed amount each month. You can also set up an automatic withdrawal from your paycheck or another account at most banks. Do whatever is easiest for you and they way you manage other "payments".
Imagine how it will feel when mid-November rolls around and you go to the bank, withdraw your Christmas money, pay cash for everything and have no credit card bills in January! You might even have cash left over after shopping frugally and can put it into a new account to be used for the following year's Christmas spending.
Another benefit to using a Christmas savings account is that you’ll earn interest on the money you’re putting away. Although interest rates are quite low, you're still earning a little bit. And you're certainly not losing anything.
Even just putting $50 - $100 per month in can really add up. When the Christmas season arrives, you won’t have that awful feeling of being pressured to buy beyond your budget - all the while knowing you're going to be in trouble when those bills come in afterward. A Christmas season without debt could be the best gift you've ever received.
When looking for a Christmas Club, you want to look at a few key facts or data points. Do a local Google search and look for the following...
1) The minimum amount needed to open an account. Some credit unions offer different account options. For example, they may offer one account with a very low minimum balance designed for children to save, and a higher opening balance for adults. The adult account may also earn more interest.
2) Interest rate - Of course, the more interest your money earns, the more you’ll have to spend at Christmas.
3) Fees - this is important because fees can essentially eat up any interest you’ve earned or even more. Look for Christmas Club accounts with no fees assessed.
4) Closing date - is there a specific date you're required to close the account? (i.e., it may stop earning interest at a certain time) Can the account be rolled over? Or restarted the following new year?
5) Direct deposits - are they allowed? When you can automatically have a predetermined amount deposited into your account each week, it makes saving much easier. Instead of having to manually deposit or transfer money each week/month, the money is taken from another designated account like your regular savings or checking account.
Christmas Clubs are an effective means for saving for one of the most expensive times of year. Set aside a little money each week or month and give yourself and your family the best gift ever - no after-Christmas debt!