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Christmas Club Accounts: Are They the Best Way to Save for the Holidays?

christmas saving Nov 02, 2018

You might remember your parents depositing money into a Christmas Club account during your childhood. It was common to make use of these accounts to save money for the holidays. Saving just $5 - $10 a week could add up to a nicer Christmas. Maybe your parents were on to something.


While there isn’t an actual “club,” these accounts are short-term savings accounts that can be created with a minimal deposit. The money deposited into the account usually can’t be accessed prior to a certain date (most commonly November 1st).


Though the account earns interest, the biggest benefit for most users is protecting your money from yourself. You’ll be unable to spend it before the holiday season!


You’re much more likely to find these accounts available at credit unions, although a few banks still offer them. But, the big question is: Are they the best way to save money for Christmas?


Check out some other options for Christmas savings:


  1. Certificates of deposit (CDs). CDs provide a better rate of return than Christmas accounts, but it’s necessary to have a lump sum available. Just be certain that the maturity date is before you need to start your shopping.


  • It’s possible to purchase short-term CDs throughout the year, and you’ll still be ready for the holidays.


  1. Money market account. These accounts tend to pay higher interest rates than checking or savings accounts. You are limited to a few withdrawals each month, but that’s okay. You’re saving for the holidays after all.


  2. Savings account. If you can trust yourself, simply set up a savings account dedicated to your holiday spending needs. Many people won’t be able to resist the temptation to dip into the funds the first time a minor financial emergency occurs. Only you know whether or not you can be trusted!


  1. A few of the larger retailers still support layaway. You can start shopping in January and make payments on your own schedule until the item has been paid in full. Be sure to fully understand the rules. They can vary dramatically between stores.


  • Some stores charge a service fee.
  • Sometimes, you’ll be required to meet certain deadlines, such as having to pay 60% of the price within 60 days and the full balance within 90 days.
  • There can be cancellation fees. These can apply whether you canceled or the store canceled due to your failure to meet the requirements of the agreement.


  1. Short-term bonds and Treasury bills. The interest rate on Treasury bills is usually extremely low, but as close to guaranteed as you can get. Bonds have variable maturity dates. However, there’s sure to be something that will work for your situation.


Many people are concerned about interest rates when saving for the holidays, but consider the rates at this time. CDs, money market accounts, and savings accounts are all paying 1% or less. If you invest $1,000 immediately after Christmas, that’s only $10 worth of interest after a full year. A 12-month Treasury bill is only paying around 0.09% right now. That’s only 90 cents on $1,000.


Avoid worrying about the interest rate and choose the method that is most likely to work for you. If you don’t have a nice lump sum to invest with, CDs and bonds probably aren’t an option. If you know you’ll dip into the account, a money market account won’t be effective. Match your financial situation and your temperament to your savings method.


A Christmas club account is a great solution if you have limited funds to get started and you need to keep the money isolated from yourself. Many of us have a difficult time not spending our savings. A Christmas club account just might be your perfect answer.


Happy holidays from the Prosperity Process and BNB-Boss!




Michelle R Russell

© The Prosperity Process, LLC  

for BNB-Boss

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