Christmas Clubs: How Does a Christmas Club Account Work?

Christmas clubs

Does it feel like the holidays sneak up on you every year? Instead of getting caught with a cash shortage come year-end, consider stockpiling money all year for gifts and travel. Christmas Club Accounts automate your savings to make the holidays feel a lot more affordable.

Do people still use Christmas Clubs?

The short answer, yes. While Christmas Clubs were more popular in your parents’ (or grandparents’!) generation, they still exist. They’ve stood the test of time because the holidays return every year, seemingly with more elaborate celebrations and wishlists. It makes sense to siphon off a little of your paycheck every month, rather than blowing your budget out of the water once the holidays roll around.

What is a Christmas Club Account?

A Christmas Club, or a holiday club account, is a savings account that’s been specially tagged for holiday spending. You make consistent payments (weekly, bi-weekly, monthly, or quarterly) into the savings account with the intention of pulling out the cash around November 1 of each year. Most people use their Christmas Club savings on gifts, travel, and other festivities, like more expensive meals, outfits, and outings.

Why should you use a Christmas Savings Account?

When you open your Christmas Savings Account, you can generally choose to have your monthly contribution deposited directly from your paycheck. That means you can save without “feeling” the deduction or handling any transactions. Often, you can even set up an automatic transfer from the Christmas Club to your normal account on November 1st. Essentially, these accounts exist to save you stress when the holidays approach.

Pros of Christmas Clubs

Contributing to a Christmas Club is a hands-off way to build a positive money habit of saving. You’ll quickly see that every little bit adds up and spreading out the expenses across the entire year makes the holidays much more manageable.

A Christmas Savings Account is perfect if you (or your partner) lack self-restraint or lose track of your money goals and prefer set-it-and-forget-it style savings. And a Christmas Club might even help you avoid credit card debt if you have a tendency to overspend around the holidays. Plus, it feels like a bonus at the end of the year when you access all this cash you probably didn’t feel was missing in the first place.

Cons of Christmas Clubs

Most Christmas Clubs don’t earn great interest. In most cases, your money is tied up until November 1, making it unavailable if an emergency arises. Or you might have to pay a fee to access your money early. Plus, just because you open a Christmas Savings Account doesn’t mean it’ll be enough to cover all your holiday expenses. If you didn’t budget correctly throughout the year, you might still feel some holiday strain.

Where can you open a Christmas Club Account?

When it comes to Christmas Clubs, credit unions are your best bet. Credit unions are generally community-focused, have accessible customer service, and low fees. Some banks also offer Christmas Savings Accounts. The simplest way to find out what’s available to you is to ask around to your local financial institutions.

Other types of Christmas Savings Accounts

Christmas Savings Accounts are like automated cash envelopes. The principle of allocating funds to specific causes extends beyond the holidays. Many people use vacation clubs to put away smaller, more affordable chunks of money as they work toward the target amount they need for their big trip.

You can also do a “DIY” Christmas Savings Account by putting your money into a Certificate of Deposit (CD). This locks your money away for a set amount of time, after which you receive a slightly higher amount of interest than a standard savings account.

Even a non-specific high-yield savings account could be a useful option for your holiday savings if you know you’ll be able to let the money grow and resist the urge to take it out before the holidays. (Because in this case, the account itself won’t block you from withdrawing early like a Christmas Club or CD does.)

Stress-free saving

There are plenty of sources of stress in life—celebrating the holidays with your loved ones shouldn’t be one of them. Regardless of how you choose to save, don’t let the holidays derail your budget. Close out the year thankful for what you have and what you’ve earned, then head into the new year with your budget on point!

Scroll to Top