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Should you create a holiday savings fund? (And how)
Holiday Spending

Should you create a holiday savings fund? (And how)

In this series, we explore the area of holiday spending. This week, Megan discusses whether you should create a holiday savings fund and some tips on how to do so.

What if there was a way to stress less about the holidays? To kick back and enjoy those chestnuts roasting by an open fire all while feeling guilt-free about your holiday spending.

Holiday savings funds are increasing in popularity, but they are actually a throwback. In the 1970s these types of savings accounts reached their peak and were affectionately known as Christmas Club accounts. It is very likely that your mom or grandmother had one and deposited money into it almost religiously.

Christmas spending. An event that can sometimes blow or at least derail your whole budget. You wake from your egg-nog induced coma in January wondering why you only have two cents in your checking account.

A Christmas Club account is very similar to any other type of savings account in that you regularly contribute money towards a goal. However, these accounts are meant to be withdrawn annually instead of continually building towards a long-term objective.

That annual withdrawal? Christmas spending. An event that can sometimes blow or at least derail your whole budget. You wake from your egg-nog induced coma in January wondering why you only have two cents in your checking account.

But holiday savings funds help to mitigate this unpleasant experience. By contributing a small amount monthly, even as low as ten dollars you can limit the impact holiday activities have on your budget. Additionally, with the pressure off you will hopefully be less likely to turn to your credit card to cover all of your purchases.

Mainstream or modern “big” banks may not always have these types of savings accounts, known as club accounts. Vacation club accounts were another popular form of small-goal savings accounts. Smaller banks and neighborhood credit unions are more likely to over these services to their members.

Though the incentive of getting a jump on preparing for the holidays is pretty great, there are not many other advantages to a Christmas club account. Often, the interest accrued can be decent, but only if you find a credit union with a higher interest rate. Additionally, some accounts require automatic deductions and impart a fee or penalty if the funds are withdrawn early.

On the other hand, this method of set-it-and-forget-it might work well for those who have difficulty setting aside money for future goals. Furthermore, keeping your funds in a separate account with consequences for early withdrawal can help keep the temptation of spontaneous spending at bay.

In general, the advantages and drawbacks of Christmas Club accounts are as follows:


  • Planning for the future means less stress and overspending
  • Forced saving with automatic deductions
  • Helps to eliminate the temptation to spend by keeping the money in a separate account and having penalties


  • Not widely available at large modern banks
  • You don’t have easy access to your money if you really need it
  • You will incur a fine if you have to withdraw early
  • Some banks may put a cap on how much you can save up

How to become a club member

If you decide that forcing yourself to set aside money for the holidays would probably be a good idea, then you will need to do some research. As mentioned, not all banks offer this specific type of savings account. Most likely, you will need to find a credit union.

In some cases, a credit union may require you to open a traditional checking and or savings account. In addition, you will need this account to have a balance; sometimes as great as $100. Therefore, you should weigh the pros and cons of not having access to $100 for at least a year in addition to regular savings deposits.

Once you have opened a Christmas Club account, decide if you want automatic deductions or if you would like to pay your own installments. Some banks may require you to contribute a certain amount each month, typically this number is not very large.

Pay close attention to any penalties and the fund disbursement dates. You will want to know when you can access your savings without incurring any fines. Then, you should be ready to go! Welcome to the club you wise financial guru you.

Are there alternatives?

Having your money, not at your immediate disposal may sound too risky for you, and that is okay. However, that doesn’t mean that you shouldn’t start saving in advance for holiday spending. There are alternatives to a Christmas Club savings account.

Traditional savings accounts work just as well as Christmas Clubs when it comes to holding your money. If you plan to use this method just be sure to keep a running total of your deposits. This way you will know what portion of the account is being set aside for December spending.

Money market accounts can also be used. Like Christmas Club accounts they may have penalties for frequent or early withdrawals so make sure to read the fine print. Unlike holiday savings accounts, these accounts will likely have a better interest rate so you can boost your monthly deductions.

Though these accounts may not compel you to save as much as a true holiday savings account, they will allow you to build up funds and avoid credit card debt.

Are holiday savings accounts worth it?

The answer to this question largely depends on your personal saving and spending habits. If you find yourself consistently overspending during the holidays, relying on credit cards, and lacking the motivation to save throughout the preceding months, then a Christmas Club account may be a good idea. It can prompt you to save and ease your mind around Christmastime.

If you are already pretty diligent about saving for your goals and monitoring your holiday spending, then you may not need to go all-in with a Christmas Club account. There are alternatives that can help you set aside money without having strict policies or hefty penalties.

The holidays doesn't have to ruin you financially. But ultimately, the decision about how to fund your gift-giving bonanza is up to you!

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