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Your Money: Check out Christmas clubs

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Did January’s bills ruin your holiday spirit? Are you determined that, this year, you won’t blow your Christmas budget?

Now is the time to plan ahead so the 2012 holidays are merry and bright, not overshadowed by debt. The Better Business Bureau advises consumers to make this year’s holiday season easier on the family finances by setting up a Christmas club account now.

Traditionally, Christmas club accounts have been offered at credit unions and most banks. Customers put a small amount of money into a savings account every month until the fall, when they can start making withdrawals for holiday expenses. According to the Credit Union National Association, about 72 percent of credit unions run Christmas clubs, and consumer interest in these clubs is steady.

Some retailers also a Christmas club that pays interest on the money you set aside with them throughout the year. However, unlike setting up an account with a bank or credit union, the money must be spent with that retailer.

Along with taking the time to shop around for the best interest rate, it’s also important to read all of the fine print that accompanies such accounts. A Christmas club account is a great savings tool throughout the year and the perfect way for families to get a hold of their holiday spending.

The BBB recommends that it’s never too early to consider budgeting for next year’s holiday season and offers the following advice on setting up a Christmas club account:

Build a budget and stick to it. Consider how much you spent in the previous holiday season to help anticipate how much you will want to set aside every month.

Start saving now. The sooner you start setting aside money every month, the better. By setting up a Christmas club account in January or February, you’ll benefit more from the interest rate and start the year off on the right foot.

Shop around and ask around. While the interest rate on Christmas club accounts is not typically very high, it can vary, so shop around for the best deal.

Read the fine print. Christmas clubs are essentially short-term savings accounts, but there are a few details that make them different. In some cases, there might be a minimum required deposit to open the account, or a minimum amount you must deposit every month. In addition, there is often a financial penalty for withdrawing the funds before the holiday shopping season.

Automate the process. Most Christmas club accounts allow for monthly automatic deductions from your bank account or paycheck. This helps lessen the pinch. Just make sure you don’t set aside so much that you run the risk of overdrawing on your accounts.

Know the deal with retailers’ Christmas clubs. Some stores are now offering their own Christmas clubs. The money socked away with the business all year long can be used only at their stores, so evaluate your holiday shopping needs before signing up with a specific retailer.


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