The older you get, the more obligated you feel to purchase Christmas gifts for people in your life. Unfortunately, as you grow older, more people enter your life. Nieces, nephews, stepchildren, coworkers, and people you serve with at church. In time, grandchildren become a part of your gift-buying list as well.
If only your bank would automatically set aside a portion of your funds for gifts so you couldn’t accidentally use them for bills and other expenses. Unfortunately, that’s not how banks work. Instead, you have to do one of two things each holiday season: stay within your budget, which often, is too small for all the gifts you want to purchase or put your purchases on a credit card.
Of course, charging more than you can afford to pay for is asking for trouble. Staying within your budget, regardless of how small it is, remains the most financially responsible way to purchase gifts in 2012.
However, you can do something about next year – starting now. Your parents may have had a Christmas club account back in the day. Much like bell-bottom pants in the 70s, these types of accounts were popular for baby boomers but have since largely died off as rewards credit cards, money market accounts, and other, more “modern” alternatives took their place.
Christmas club accounts were beautiful in their simplicity. Savers were not out to get rich on the interest they received from the account, and there was no talk of compounding rates.
Savers would transfer a small amount of money from their main account into their Christmas club account each month (or payday) in anticipation of expenses they would have during the upcoming holiday season. Of course, there really was no “club.” You didn’t get a membership card, go to meetings, or have to learn a secret handshake. You just saved money.
Today, much like another of the fads of yesteryear, the “layaway” system, Christmas club accounts are again gaining popularity. Sure, you could stow the money away in a normal savings account but Christmas club accounts often come with added benefits. For example, many
Christmas club accounts mature on a set date with the funds automatically deposit into your main account. Sometimes the interest rate is a little higher and to encourage you to continue saving, money is automatically transferred into the Christmas club each month. In some cases, you may have to pay an early withdrawal fee if you take the money out before the maturity date.
You may not find these accounts at a traditional bank but more than 70% of credit unions report that they have Christmas club account options.
For the 2012 holiday season, do not spend more than you can afford. Disappointing a third cousin, twice removed is better than going into debt to buy them a stainless steel coconut peeler. By the way, if you find you have to “peel back” your gift list, let people know so they do not buy you something as well. Most people understand that the days of purchasing gifts for people outside of your close-knit social group are over.
For 2013, open a Christmas club account dedicated to the 2013 holiday season. Set up automatic transfers and stay disciplined. Resolve not to take on debt for gift giving. “Yule” be glad you did.