Before You Open a Christmas Savings Account

Santa at the door to a bank vault
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A Christmas saving account is an account that your credit union or bank may offer to you. The premise of the account is to automatically withdraw money from your checking account each month to help you save money for Christmas. The amount that you have accumulated will be mailed to your home or deposited back into your checking account sometime in November. Creating a holiday budget and using Christmas savings strategies will help you make the most of your holiday savings.

Opening a Christmas Savings Account

You can open a Christmas savings account at your local bank or credit union. Usually, only smaller banks and credit unions may offer this specific account. It may be called a Christmas Club account. However, if you do not have the option to open this account, you can still open an account specifically for holiday savings. You will want to make sure that it is not linked to your overdraft so that the money will stay safe even if you accidentally overspend and overdraw your account

Choosing the Amount to Save Each Month for Christmas

Each budget and personal financial situation will determine how much you should put aside for Christmas each month. You can start by looking at how much you spent the last year on Christmas to create your Christmas budget. Simply divide this amount by twelve and you will have the amount that you should be setting aside each year.

Another option is to determine how much you want to spend each year on Christmas. The amount may vary depending on how many people you need to give to each year and the family expectations you have over the holidays. As you have children, you may decide you need to increase the amount you are saving each year.

Advantages of a Christmas Savings Account

The biggest advantage of this account is that you never see the money, so you are less likely to spend it. You can have the money drafted out of your account the same day that it is deposited. This account is not used as an overdraft protection account, so the funds will not be used up that way. If you have problems leaving money in savings, you may want to consider using this type of account to save for Christmas.

  • Makes saving automatic with transfers.
  • Protects your Christmas savings by making the money difficult to access except at Christmas time.
  • Easy to monitor and track the amount separately from your other savings.

Disadvantages of a Christmas Savings Account

The biggest disadvantage to this account is the low-interest rate that your money earns in this account. You are better off putting the money into a higher interest earning account such as a money market account. If you are financially responsible and do not touch your money you can put it into a money market account (offered through your bank) or an online savings account (which offer higher interest rates). Additionally, some traditional Christmas savings accounts may have penalties in place if you withdraw the money early.

This can be beneficial since it helps motivate you to leave the money in the account. However, if you need the money because of an emergency, you may face penalties if you take it out early. 

  • Earns a lower interest rate than other savings account.
  • Possible penalties if you need to make an early withdrawal.
  • You must wait until November to access the money, even if you find a great deal on a gift earlier in the year. 

Your Options for Christmas Savings Accounts

The Christmas savings account is a good option for those who are not disciplined enough to set aside money each month for Christmas. This can help you develop the discipline if you need it. One of the best ways to begin saving money is to do it automatically. If you are interested in opening a Christmas savings account talk to an account representative at your local bank or credit union.

You may opt to open an online savings account and set up an automatic draft yourself and have your own Christmas savings account with a slightly higher interest rate. If you really lack the discipline of not dipping into your savings then opening a separate account will help protect the money. If you open it at a different bank, it will slow down how quickly you can transfer it and help stop impulse purchases.

Making the Most of Your Christmas Savings

Once you have saved the money for the holidays, it is important to make the most of the savings that you have. A budget and spending plan can help you stay on track. It is easy to overspend even with savings. There may also be unexpected holiday expenses like an office party. You may need to save additional money for holiday traveling. The more you plan to include, the more likely that you will not need to use a credit card or end up struggling to make ends meet in January. Just remember that a solid plan is the key.

You can make Christmas shopping easier by planning ahead and looking for Christmas gift tips when making your list. As you work to save money, you will be surprised at how much you can get and how much less stressful the holiday season will be. One year of saving in advance will help you start doing it on a regular basis. Setting up your account in now will make Christmas that much easier.