Now is the Time to Start Your Christmas Club Account

Christmas Clubbin’ It 2011!

“Many banks have a new kind of Christmas club operation. The new club helps you save money to pay for last year’s gifts” – anonymous

Dear $uper $aver: When I was a very young child, about 6 or 7 years old, I can remember making holiday gifts for my family at school. We really had very little education about holiday budgeting, and at that age, most of us thought Santa had a bottomless bag. There was no thought to who paid for the holiday gifts.

The first recorded “Christmas Club Account” was started by Dime Savings Bank of Toledo, Ohio, which issued a 25 cent token for starting a Christmas Club account back in 1922!

When we got a little older, our parents took us to the bank around the first of the year and all three of us (myself, my brother and my sister) all opened what was called a “Christmas Club Account.” I remember adding my allowance to the account a few dollars at a time and my dad teaching us about getting “interest” on the money. We would watch the money grow throughout the year, even adding a bag of change here and there that were proceeds of our Kool-Aid stand. About two weeks prior to Christmas, one of our parents would take us to the bank, and we would “cash out” the Christmas Club account. Usually we had accumulated less than $100 each, but the thrill of having cash to spend on holiday gifts was really rewarding as a child. I wonder what happened to this tradition. Your thoughts?

Sincerely, Ralph N., New Britain, CT.

Dear Ralph: Your letter fills me up with great memories as well as some information that I would love to share with other readers. First however, a note: Now is the time. Yes, now, to start saving for Christmas 2012.

We must be around the same age because I, too, had a Christmas Club account. Back in the day, almost every local bank or credit union offered an account called a “Christmas Club.” When I had my first account at the Des Plaines National Bank, I can remember the personal banker who set the account up did make it seem like it was a “club” that I was joining. I even got my own passbook (will explain later for Internet bankers) as well as a great gift of a velvet Christmas stocking!

For readers who don’t know, a Christmas Club account is a special savings account that is set up at your local bank with a simple concept: There is usually no minimum balance. You add money throughout the year and although you have the ability to withdraw your funds, there is often an incentive to keep the money in for at least 11.5 months, from January through mid-December.

You are encouraged to make weekly or biweekly deposits and the difference between a Christmas Club and a traditional savings account is that you have a specific goal in mind: Saving up enough to pay for all of your Christmas gifts in advance with cash! Whew, lofty goal!

I was 9 years old when I opened my first Christmas Club and I remember how excited I was to cash in and go Christmas shopping. I had “earned” $150 during that year in the account and it included some allowances, money I earned from a variety of activities such as my own Kool-Aid stand, selling homemade potholders door to door, and money from lawn mowing. (I was pretty enterprising). The best part of the Christmas Club was getting the money to spend on holiday gifts for my family and one or two friends.

Although over the years Christmas Club accounts have been phased out by the larger banks, they seem to be making a little bit of a comeback. I think starting a Christmas Club account at your local bank for your own children or nieces or nephews would even be a great Christmas gift this year. If your local bank or credit union offers a Christmas Club option, there is nothing more rewarding than helping children learn about money. You can bring them to the bank, help them with the paperwork and help them with their first deposit, $10? $25? The recipient will remember you all year long when they make deposits to help them reach their goal.

In today’s economy a Christmas Club account does more than help teach children about budgeting for the holidays. It is a good way for adults to build up a chunk of money to spend on holiday gifts for Christmas 2010. The goal? A great and rewarding holiday without a lot of credit card debt!

Christmas Clubs are educational. They teach:

1. The ability to save: Deposit $10 weekly from the first week of January through Thanksgiving and you will have almost $500 to spend on Christmas without incurring debt.

2. Work ethic: Kids with a goal (or adults) find ways to earn money to put into the account.

3. Restraint: Keeping the money in the bank until the goal is reached.

4. Budgeting: How to divvy up and spend the gift savings.

In my opinion, smart banks and credit unions, if they have not done so already, will re-institute this tradition and, as they have begun to do with other new accounts, reward the account opener with a $50 deposit just for joining!

I called Chase, Bank of America, PNC, Citibank, Associates Bank, Wintrust, Suntrust and First Midwest and none of the personal bankers could tell me if they offer a Christmas Club account. This is a gaping opportunity for banks to get going. Layaways are coming back, and I predict that Christmas clubs will as well.

We are all in this together. If you have money saving suggestions (or problems to solve), please share them with me so I can share with others. If you have something to report or want to share your money-saving tips, leave me a comment.