I may well be showing my age by writing an article about creating a Christmas Club account. For a long time, this was a popular way that many people were able to afford to do their Christmas shopping (besides making using homemade gift ideas)!
Even though most (if not all) banks have done away with option of a Christmas Club account, you can still use the concept to make sure you are prepared for your holiday shopping.
What Is A Christmas Club Account?
What usually happens when December rolls around is people start to build extensive lists, and then shop based on those lists. There is usually no concern for a budget or a bank account balance, since most people will be shopping with borrowed money! There are some people who will store up credit card benefits – such as cash back or reward points – and use those to do their Christmas shopping; but for the majority of people, will simply pile on the debt!
A Christmas club account is a special savings account that allows people to set aside money periodically, during the year, for their holiday shopping. During the year, you put aside a certain amount (maybe $10 or $20 each week), then when it gets close to Christmas, you are allowed to withdraw the full balance.
These accounts usually pay low interest rates, and have penalties for early withdrawal, but they are still a great option for those who find themselves having to pay off debt every year after the holidays.
You open the account in the beginning of the year, and start making deposits immediately. Then [usually], at the beginning of November, you are allowed to withdraw your money with no penalties. This way you can use cash to check out the Black Friday ad scans, and do some early Christmas shopping without falling into debt!
Unfortunately, most banks have eliminated these accounts from their offerings. Just perform a search at the website of a major bank, and you will see that the Christmas Club has quickly become a thing of the past!
However, with the way in which many banks are structured, you can easily replicate a Christmas Club savings account, and gain all the benefits.
How To Open A Christmas Club Account
If you are currently using a traditional bank for your checking account, find out if they offer a basic, free savings account. If they do, then all you have to do is set up periodic transfers into your savings account. If you are looking to simply build up a few hundred dollars or so in order to do your Christmas shopping, then by depositing $10/week, you can easily meet your goal.
Even if your goal is to save for other events, you can make weekly or bi-weekly deposits, and keep a separate tally of how much of that money is earmarked for holiday spending. If you want to take full advantage of technology, you can set up automatic transfers to start and stop whenever you desire. You can even direct your job to help you meet your savings goal via direct deposit!
If you have large savings goals (such as an emergency fund), it may be better to keep your “Christmas Club” money in a separate account. This way, you don’t run the risk of mixing your funds.
Starting An Online Christmas Club Account
If you are comfortable with establishing an online savings account, this process is pretty much done for you. There are a few online banks – such as ING Direct and Smarty Pig – that will allow you to set up various sub accounts. This means that you can have one savings account, but have the money separated by purpose.
For instance, you can have $3,000 in your savings account, and break it up as follows – $500 Christmas Club, $1,000 emergency fund, $500 vacation fund, $500 car repairs, $500 new wardrobe for when I hit my weight loss goals!
Once you are ready to spend your money, it will take about 2 or 3 business days to get the funds transferred into a traditional bank; or you may be able to use a debit card for your purchases (depending on the bank).
photo by Dream Designs
Reader Questions
- Have you ever used a Christmas Club account?
- How do you save for Christmas?
- Do you currently use an online bank? If so, have you established sub-accounts?
Disclosure: This blog accepts forms of cash advertising, sponsorship, paid insertions or other forms of compensation. Unless otherwise expressly stated, you should assume that NotMadeofMoney.com has an affiliate relationship or other material connection to the providers of goods and services mentioned by, recommended, hyperlinked to, or otherwise referenced on NotMadeofMoney.com. Please see the full disclosure statement.
