Budgeting wisely can greatly reduce the holiday hangover that many overextended families' experience. A Christmas Club account is a great tool for gradually socking away money throughout the year to spread the financial burden of holiday spending.
Traditionally, Christmas Club accounts have been offered at credit unions or small banks where the consumer can set aside a small amount of money every month into a savings account. In the fall, the consumer starts making withdrawals to pay for holiday expenses. According to the Credit Union National Association, about 78 percent of credit unions run Christmas Clubs.
Some retailers are offering their own form of a Christmas Club that pays interest on the money you set aside with them throughout the year. Unlike setting up an account with a bank or credit union, the money must be spent with the retailer.
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. Consider how much you spent in the previous holiday season to help anticipate how much you will want to set aside every month. To help you budget for the holidays, the BBB, along with ClearPoint Financial Solutions, has developed an interactive budget tool that includes a holiday spending calculator.
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. While the interest rates 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 deposit required 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 arrives.
AUTOMATE THE PROCESS. Most Christmas Club accounts allow for monthly automatic deductions of the amount you determine from your bank account or paycheck. This helps lessen the pinch. Just make sure that you don't set aside so much that you run the risk of overdrawing on your accounts.
KNOW THE DEAL WITH RETAILER CHRISTMAS CLUBS. Some stores are now offering their own Christmas Club. 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.
Kelvin Collins is the president/CEO of the Better Business Bureau of Central Georgia & the CSRA Inc. Refer questions or complaints about a company or charity to (800) 763-4222, www.bbb.org, firstname.lastname@example.org