Should You Open a Christmas Club Account?

Do you have a Christmas Club account at your bank or credit union?  Did your parents have such an account?  Do you even know what a Christmas Club account is?

Vintage Christmas Club Account Ad


Christmas Club accounts are bank savings accounts, the purpose of which is to save for Christmas spending.  They are a relic of the Great Depression-era in the US, and they remained popular through most of the remainder of the 20th Century.  Banks and other savings institutions used to advertise for people to open a Christmas Club account.  The idea was that if you set up a separate account to save for Christmas and if you deposited some money into the account throughout the year, it would smooth out your expenses and make the cost of Christmas more bearable.  Back in the day when passbook savings accounts such as Christmas Club accounts paid 5%, you made a decent return on your savings.

Out of Favor

Christmas Club accounts have fallen out of favor in recent decades, perhaps with the deregulation of rates paid on such accounts (rates are much lower now) and with increased bank costs associated with handling these accounts.  Retail banking isn’t as profitable as it once was for banks.  Anyhow, banks no longer advertise for and promote Christmas Club accounts, and so they have fallen out of favor.

Savings Buckets

Though Christmas Club accounts per se are not as popular, their underlying concept is increasingly popular.  The concept is that you have different buckets of savings for different goals that you have.  Paying for Christmas each year is an important goal and having a separate bucket of savings for Christmas is an old-school concept that makes a lot of sense in the new-school of today’s financial planning.  They also become an interesting Future Value mathematics challenge:  If I deposit $200 monthly and it earns 5% compounded, how much money will I have at the end of 12 months?  Answer:  $2,455.77.  And, because it is all self-directed and not subject to IRS regulation (except for taxable interest income on the account), you can choose not to spend all of your balance this year and so get a head start on next year.


Should you open a Christmas Club account?  If you work at a job that is primarily salary-based and you don’t get a year-end bonus, a Christmas Club account makes a lot of sense.  Your income is smoothed out, and so should your expenses, especially if you tend to spend a lot on Christmas.  Where to find a Christmas Club account?  A Google search says that a Credit Union is currently the best place, but failing that, any separate account at any bank will do.  Moreover, think about the Christmas Club account concept for other financial goals.  Do you want to travel?  Open a Travel Club account – not that such a thing exists, but you could make one up just by going to your bank branch and opening up a separate savings account.  It is a way of enforcing savings and spending discipline, which are sorely lacking with some people, as well as with most governments.

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