Wondering if a Christmas club savings account is a good idea?
Poor planning with Christmas saving can turn your red Christmas blue
Christmas spending can sometimes turn even the jolliest person into a Scrooge.
How many of us plan to do Christmas saving throughout the year? Then come November we realize it’s too late and we reach for the almighty credit card?
Sure it may make the kids happy but now you’re starting your new year deeper in debt. Repeat the cycle the next holiday season and it’s no wonder our country has a massive debt problem!
Christmas is supposed to be a time of joy; of giving, of family, of love and great meals shared with loved ones.
Throw in bad sweaters and the occasional insufferable modern Christmas “classic” by someone like Justin Bieber and now you have the makings of what many of us have come to associate with Christmas.
However, one holdover from our grandparents day still makes a lot of sense!
Actually, a lot of habits from their day make a lot of sense. But for Christmas spending and savings habits, there is none better than the Christmas club savings account.
Don’t celebrate Christmas?
If your family does ANY holiday gift giving in December these Christmas club savings account strategies can still apply and will help your family.
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The app Trim automatically looks at your monthly bills & spending and then cross-checks that with savings programs almost all vendors have. When they match up, you save. They’ll even handle the hassle of canceling memberships you no longer want or renegotiate bills for you like insurance and cable bills.
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Christmas spending in America
According to Gallup, one of the long-standing premier polling companies in the US, the “average” American family will spend $785 on Christmas this year. This is consistent with previous years, but down quite a bit from the all-time high of $909 in 2007.
You can see more statistics on Christmas spending on their chart, which shows that while the average that will spend $785 this year, the majority of families actually spend $1000 or more.
What is a Christmas account?
I go deeper into why you not only need a Christmas club savings account but also 4 other bank accounts in a previous post about why you need 5 Bank Accounts and not just checking and savings. If you’re going to do Christmas saving right, it’s essential you check out that post for more detail.
A Christmas club savings account sometimes called a Christmas Club, is simply a bank account that is specific for Christmas saving.
This program came into effect during the great depression. Essentially you set money aside every month (or week) into this special savings account. Then in November as it approaches the holiday season, the bank automatically transfers it back into your checking account.
Do banks still have Christmas Clubs?
The short answer is yes; many still offer a Christmas club savings account for Christmas saving. My credit union does and that’s what my family uses. But according to the Credit Union National Association (CUNA), only 9% of people in America use a Christmas club savings account.
They go on to say that about 72% of credit unions still offer them. While some banks also offer them, the credit union is the king of the Christmas club savings account.
So if your bank doesn’t offer one, take a look at your local credit unions. They likely offer that, along with the personal service that can come with not being a huge multi-national industry.
How do you save for Christmas?
One of the keys to doing Christmas saving right, no matter how much you spend, is to start saving for it months in advance; ideally in January.
According to the Statistica, in a recent study, they found that upwards of 66% of people did not save anything for Christmas spending.
In looking specifically at European countries, The Czech Republic dominated, followed closely by the United Kingdom. But even then, the highest percentage that did Christmas saving was only 35%!
So if you’re in that boat, don’t feel bad; you’re in good company! But I do want to make some suggestions that will set your family up for future financial success!
This is what my family does to prepare for Christmas spending:
- We plan to spend $1,000 on Christmas spending
- We know the majority of that will be spent starting in late November
- Thus we divide $1,000 by 11 (months) – that equals $90.90
- We set aside $90.90 each month (starting in January and transfer from our checking into our Christmas club savings account (that is one of the 5 bank accounts we have)
- That $1,000 includes what we spend on a foster child who’s Santa list we sponsor each year (roughly $100)
- That $1,000 also needs to cover extraordinary expenses (such as travel or fancy Christmas grocery items)
The amount your family spends may vary and that’s OK!
You don’t need to spend a fortune, go into debt, or wreck your family’s finances to make your kids happy.
In fact, just the opposite. When your kids see you saving and spending wisely (and if they still believe in Santa like my kids do, this lesson will come later) you are setting them up for future financial success and ensuring they will win with money!
Speaking of winning with money, Dave Ramsey himself was asked how much should be in a Christmas club savings account.
Dave came back with the following:
- The average Christmas spending per family last year was around $800
- The average household income was around $50,000.
- If you make $25,000, then you would be half of average, and your whole Christmas budget should be about half of the average, or about $400.
- If you make $200,000, you could go as high as four times that ($3,200) if you wanted to and still be “reasonable.”
He goes on to say “I’m always of the opinion the adults can fend for themselves. In case of a budget crisis, we should only take care of the children.” I would agree with all of his opinions, wholeheartedly, but then I am a big Dave Ramsey fan!
Hear Dave answer this question on Christmas spending right here!
— Deseret News (@DeseretNews) December 9, 2014
One thing that’s important to remember is that it’s not the amount of money you spend on Christmas that makes it special.
Now if you’ve spoiled your kids the last few years to the degree that they now behave like Dudley from the Harry Potter series, you’re going to need more than this blog to turn it around. But I am convinced that any parenting oversights (and we all make them) can be fixed.
Simply being aware of the issues and being intentional and honest about them (with yourselves and your kids) is half the battle.
What do kids want most for Christmas?
Mostly they want you!
They want you and your spouse connected. They want harmony and love in the house. And if you don’t always have that (been there, done that), then working on that is the greatest Christmas gift you can give to your family.
Kids aren’t complex creatures. As we age and encounter life, the inevitable challenges & disappointments come in more and more. We naturally get more complex with our emotions.
But at a young age, our needs are simple.
“Society has covered us with materialistic desires and we forget that the greatest gift is to know that there’s someone out there that cares about you” – Rodri Chávez
The other sad reality of Christmas spending is that MANY families go into debt to do it!
In a recent survey by a company called creditdonkey.com, they found that on average, about 37% of families use credit cards to pay for Christmas spending.
I don’t advocate the use of credit cards at all and don’t actually have any in our house. But I get our way of doing things may not be your way. That’s OK! But I do want you to think about the choices you make regarding debt. I want you to be intentional instead of just reaching for them out of desperation.
Need to spend more than you have? Rather than go into debt, why not check out one of my most popular posts about 21 Ways to Earn Extra Money this month? Many don’t even require you to leave your house!
Let’s look at how debt robs you of your Christmas cheer!
- The average credit card interest rate is currently about 16% (according to CreditCards.com)
- Let’s assume that your family only charges $800 for Christmas spending to that credit card
- Over 38% of households use credit cards already
- The average household carries upwards of $6,000 in credit card debt already (and that figure, on average, is much higher if you live on the east or west coasts in the US)
- So if you charge an additional $800 on top of the likely $6,000 you already have, your average minimum monthly payment could be as high as $442.
- Paying only minimum payments, it will take about 81 months to pay off the total debt (and that, of course, is ONLY if you quit charging new purchases)
- 81 months is almost 7 years!
- In that 7 years, you will not only repay the original $6,800 you borrowed but an additional $1,724 in interest!
- Putting aside the amount you charged, just investing that $1,724 instead of paying it for the privilege of borrowing money could earn you upwards of $3,359! (factored using an average of 10% growth over 7 years – compound interest calculator courtesy of moneychimp.com). You would almost double your money!
Of course, interest rates vary and are not guaranteed, so your actual results could be different – my point is to get you to realize just how bad an idea it is to use credit cards and what taking the same money and using it in a different way could do for you and your family!
Imagine what you could do with an extra $3,359!
How do I save money on a tight budget?
The key here is budgeting. A written budget you write out and stick to before the month begins. You want to know exactly where all of your hard earned dollars are going, even if you don’t have a lot of them.
Once you begin to budget you’ll quickly identify if you have a spending problem, an income problem or are simply living beyond your means.
If you still struggle with trying to Budget When Broke, check out one of my most popular personal finance posts to give you more actionable tips to get back on track!
Not on a written monthly household budget?
It’s essential for the financial future of your family and essential for your Christmas saving planning.
I have a copy of my Budgeting Spreadsheet available at no charge.
It’s a simple, highly customizable, Excel spreadsheet and you can download it quickly and easily FOR FREE!
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In my case, they cut my monthly phone bill by $30 bucks a month and all that cost me was a one-time payment of $13 bucks!’
Talk about easy money! Check out BillXperts and see if they can’t save you money too. Some folks have saved thousands!
So What Are the . . .
5 Best Reasons You Need a Christmas Club Savings Account!
1. To keep you and your spouse from arguing over Christmas spending
- Agree (with your spouse) in January on an amount to spend for that year’s Christmas
- Stick to that amount!
- Divide that amount by 11 months to figure out how much you need to save each month through November
- Automatically transfer that amount of money every month into a separate Christmas spending savings account
- If you just leave it in your checking account it’s almost guaranteed you will find a way to spend it!
- Make sure you are doing a written household budget every month before the month begins and that you budget in your Christmas spending money so you aren’t scrambling each month to come up with it!
2. To keep you from over-spending
- Be realistic about the amount you spend; a family making $40,000/year does not have to spend $2,000 to make Christmas special
- If you make under $100,000 gross household income but over $60,000, somewhere around $1,000 to $1,200 is about right.
- Make $40,000-$50,000? Somewhere around $800 is about right
- But if your gross household income is under $40,000 then spend accordingly, but it also doesn’t hurt to put some thought into both long term career options as well as possibly picking up a part-time seasonal job
3. To keep from not having enough money to spend
- But understand that Christmas spending doesn’t have to break the bank
- There was one Christmas where I was almost totally broke. You know what I did? I bought a case of mason jars, got out my pots and pans and made homemade salsa & pasta sauce and canned them up.
- Add a cool little label I made on my computer and printed on stickers and wa-la! Instant inexpensive Christmas gifts!
- You know what those gifts had that no store-bought gifts could ever have? My love, care and personality and, literally, my flavor.
- Family and friends mostly just want you and to connect with you, so don’t stress over budgets; just put down your phone and spend some time connecting and being present to your loved ones. Trust me; that’s the greatest gift you can give them!
4. To Avoid going into debt!
- Agree to not use credit cards or debt to cover Christmas expenses
- See my example above about how simply not charging your Christmas spending to credit cards could help put an extra $3k in your pocket!
- Understand that the money set aside should cover all holiday expenses including travel, food and gifts for spouses
- Trust me, even if you have diligently saved for Christmas spending all year, it’s easy to spend all that on presents
- Recognize that many of us splurge on Christmas dinner, travel, nice bottles of wine, etc. That money needs to come out of your Christmas fund too
- Don’t painstakingly plan all year and then blow it on the finish line – this planning is designed to make your holidays loving and stress free
5. Set it and forget it so it’s out of mind
- The best part about a Christmas club savings account is that you don’t have to think about it!
- The money goes out of your checking each month into your Christmas club savings account
- Then it automatically transfers back into your checking at a set time (often Nov 1st)
- This removes temptation from the equation
- But it also removes the need for rigid discipline too
In the end, a Christmas club savings account helps you manage what can be a stressful time of year. It takes the having to remember out of the picture and enables you to focus on what’s most important; your spouse and family.
It also is a key step in avoiding debt over the holidays; a trap something all too many people fall into during the holiday season!
Lastly, it helps you avoid arguing with your spouse overspending, debt, and the budget. And if you didn’t already know it, money fights are one of the Top Reasons for Divorce! So any steps you can take to avoid that are good things to do!
I hope you find this helpful and I’d love to hear what works for your family.
Does your family use a Christmas club savings account? Any tips, questions or feedback?
Feel free to comment here or email me with any questions
I want to hear from you! Thanks for being with us!
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