How Does A Christmas Club Account Work?

Does it feel like the holiday season sneaks up on you every year? Instead of getting caught with a cash shortage come year-end, it’s a great idea to put money aside earlier in the year for gifts and travel. That said, you can leverage Christmas Club Accounts to automate your savings to make the holidays a lot more affordable!

Christmas clubs

With Christmas season/holiday debt continuing to grow year over year, saving money has never been more important. In fact, 4 in 10 people say they expect to go into debt over the holidays, according to a U.S. News & World Report study.

That said, by using a Christmas club, you’ll have a chance to experience less stress and enjoy the holidays more by avoiding credit cards, saving money, and using cash instead.

Do people still use Christmas clubs?

The short answer is yes, people do still use Christmas clubs. While Christmas clubs may have had more popularity in your parents’ (or grandparents’!) generation, they still exist.

According to AGFinancial, the 1950s and 60s were the most popular times to have an account like this, with less popularity in the 1970s.

But they’ve stood the test of time because the holidays return every year. And seemingly with more elaborate celebrations and wish lists and a more expensive holiday shopping season.

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, also called a holiday club account, is a type of savings account that’s been specially tagged for your holiday fund. It’s essentially there to help you with how to prepare for Christmas, similar to how vacation clubs can help you pay for travel.

Most people use their Christmas club savings on Christmas gifts, travel, and other holiday spending. Things like more expensive meals, outfits, and outings, as well.

The Christmas club savings is just one type of savings club. Another popular example is the Susu (find out “what is a Susu” here).

How does a Christmas club account work?

Many community banks and credit unions offer Christmas club savings accounts where you can start saving money for Christmas. The idea is to open an account as early in the year as possible so you have time to save for the upcoming holiday season.

You can then make consistent payments when you choose (weekly, bi-weekly, monthly, or quarterly) into the account with the intention of withdrawing the cash from the account around November 1 of each year.

Many accounts have a low minimum opening deposit to get started, as well. That said, it’s a good idea to make automatic deposits as you budget by paycheck in order to save for the holidays.

However, if you find that you need to make a withdrawal before the set time, you may get an early withdrawal penalty. Think of this penalty as a way to ensure you don’t get tempted to spend the money you have in the account before the holidays!

Why should you use a Christmas savings account?

Using a Christmas savings account can save you the stress of feeling like you don’t have enough money when the holidays approach. Your Christmas shopping is easier if you plan for it all year.

When you open your Christmas savings account, you can generally choose to have your contribution as a direct deposit from your paycheck.

Setting up this direct deposit can help you save without “feeling” the deduction or handling any transactions. Often, you can even set up an automatic transfer from the Christmas club account to your normal account on November 1st.

Now you have a general idea of this account type, let’s get into the pros and cons.

Pros of Christmas clubs

Contributing to a Christmas club is a hands-off way to build positive money habits of saving. You’ll quickly see that every little bit adds up.

Additionally, 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.

A Christmas club account 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. You’ll access all this cash you probably didn’t feel was missing in the first place.

In addition, Christmas savings are a great way to know in advance how much you want to spend on the holidays and force yourself to stick to a budget. You can know exactly how much you have to spend by checking your account balance.

Cons of Christmas clubs

Most Christmas clubs don’t earn great interest.

Additionally, in most cases, your money is tied up until around November 1, making it unavailable if you need emergency cash. Otherwise 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 financial strain.

Additionally, if you have an irregular income or are on a strict budget, you may find that the money you want to deposit to your Christmas fund needs to pay for other things. In this case, a direct deposit each month may not be the best choice.

Expert tip: Stretch your Christmas budget with inexpensive ideas

Christmas clubs can help you save a good amount for the holidays. But remember that you can also stick to a budget and find inexpensive ways to celebrate.

For instance, can you bake cookies for your co-workers and friends instead of buying expensive gifts? Or perhaps you can send homemade cards rather than spending a fortune on holiday cards.

If you cut back on certain things, then there will be more money left for the more expensive items on your list, such as travel or a costly Christmas present.

Where can you open a Christmas club account?

You can open a Christmas club account in a couple of different places. Check out these options:

Credit unions

When it comes to Christmas clubs, credit unions are your best bet. 

What are some of the differences between credit union and banks? Well credit unions are non-profits and generally community-focused, have accessible customer service, and low fees. Banks, on the other hand, are for-profit.

If you bank at a credit union, ask them what they offer as far as Christmas savings.

Community banks

You can also check with your community bank and see if they offer Christmas savings accounts. Community banks usually focused on serving customers in the community where they live and work. This allows the community to grow.

As a result, it is not uncommon for community banks to offer Christmas savings accounts. If not, they will certainly have regular savings account options that you can use instead. Remember, there are many ways to save up for the holidays.

Other types of Christmas Savings Accounts

Having an account that is labeled as a Christmas fund isn’t the only way to save. Here are some other smart solutions:

Cash envelopes

Christmas savings accounts are like an automated digital envelope system. The principle of allocating funds to specific causes extends beyond the holidays.

If you prefer to work with cash or find it easier, then try out the cash envelope system. Keep an envelope labeled “holiday expenses” and add money to it each month. Or do a digital version of this by setting money aside each month.

Certificate of Deposit

You can also do a “DIY” Christmas savings account by putting your money into a Certificate of Deposit (CD).

A Certificate of Deposit locks your money away for a set amount of time, after which you can receive a higher amount of interest than a standard savings account.

High-yield 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 Certificate of Deposit does.)

Traditional savings account

Another option is to simply use a regular savings account. If you aren’t overly concerned about earning interest (and since it’s a short term savings goal, interest isn’t the main factor), you can try this out instead.

Just open a regular savings account at your bank and then mark it for holiday expenses. Even utilize direct deposits if you want. It will help you do Christmas on a budget.

Are Christmas Clubs worth it?

Christmas clubs can be worth it if you want an easy way to save for the holidays. They enable you to save up money almost without thinking about it, which can be great.

Then, by the time you’re ready to consider a holiday budget, the funds are already there.

However, there are also many other ways to save for the holidays, and this idea doesn’t work well for everyone, particularly if your bank or credit union doesn’t offer a holiday club option.

What can I use instead of a Christmas club?

You can use many other accounts instead of a Christmas club, including a savings account, a CD, or even try saving money in a jar that you add cash to throughout the year.

There are a variety of ways to save up money. The most important thing is to be consistent with your savings rate and budgeting so you have what you need when December rolls around.

Do Christmas club accounts still exist?

Yes, these accounts do still exist. They are not as popular as they were decades ago, but you can still use them to fund your holiday goals.

Opening an account like this is a great way to save and can also make your other short term savings goals easier. When you automatically deposit money, you won’t miss it, and you can focus instead on other expenses.

Do banks have Christmas club accounts?

Yes, many banks have a Christmas club option, specifically community banks and credit unions. That said, it never hurts to ask your traditional bank about this.

Find out if your financial institution offers this holiday savings option that can help you save money, or if not, consider their other savings account options.

If you enjoyed reading about Christmas clubs and would like to hear more, check out these other posts!

Leverage Christmas club accounts to save stress-free!

There are plenty of sources of stress in life—celebrating the holidays with your loved ones or taking part in impulse spending at Christmas 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. In fact, why not try a 30 days of gratitude challenge in December? Then head into the new year feeling grateful and with your budget on point!

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Scroll to Top