ABCs of Christmas Clubs

By Cozette M. White

If you’re looking to save money this holiday season, you can’t go wrong with a good old-fashioned Christmas Club. First offered by banks during the Great Depression as a tool to bring customers back, they’re still around decades later. Here’s what you need to know about saving money this holiday with Christmas Clubs.

A Christmas Club is essentially a special savings account for Christmas season spending. They’re generally offered through local banks and credit unions. Additionally, a Christmas club is considered a short-term investment. Meaning unless you’re saving for a Christmas ten years from now, you’re going to close the account once the holiday season is over.

Most Christmas Club accounts begin in January. This provides you with eleven months to save up for the holiday. You withdraw your money on November 1st and make your holiday purchases. You can also often roll any remaining money over into another account. If the account is at the same bank, there may not be any fees applied to this transaction.

The benefit to a Christmas Club is that you’re earning interest on the money you’re putting away. Thus you’re making money. This is of course money you can use to spend on gifts. However, the other significant benefit to a Christmas Club is that when you put away $5, $10 or even $20 a week into the account, saving is easy and it adds up.

When the holidays roll around, you don’t have to stress about where the money is going to come from. Additionally, if you plan your savings right and stick to your budget, you don’t have to charge anything to your credit cards. Imagine a holiday season without debt!

How to Compare Christmas Clubs

When seeking a Christmas Club, you want to look at a few key facts or data points. The first is: what is the interest rate your money will be making? The more interest you make on your money, the more money you’ll have to spend.

The second item to compare is how much you need to open the account. Some banks or credit unions offer different account options. For example, they may offer one account with a $5 minimum balance designed for children to save, and a $100 opening balance for adults. The adult account will likely earn more interest.

Also take a look at the dates. Does the account close in October? November?

Are there any fees associated with the account? This is important because the fees can offset any interest you’ve earned, making the account essentially void. It becomes nothing more than a safe place to put your money.

Finally, can you add money to the account with direct deposit? When you can automatically have a predetermined amount deposited into your account each week, it makes saving extremely easy. Instead of having to set aside money and go to the bank each week, the money is taken from your normal account.

Christmas Clubs are an effective means for saving for one of the most expensive times of year. A little money set aside each week can mean a world of difference when the holidays roll around.