Join the Virtual Christmas Club!

A Holiday History Lesson

During the Great Depression, the popularity of something called a “Christmas club” grew. Not really a club at all, these were actually a type of savings account. Banks encouraged savers to sign up and put a small amount of money into the account each week. And even though the money could not be taken out until a specific date (usually November 1st), people flocked to these types of accounts, and they reached peak popularity in the 1970s.

Why would people want to lock up money for most of year? They earned a little bit of interest on it, for one thing. But the biggest allure was simply the fact that it would guarantee that they had enough money for Christmas gift shopping! After a crappy Christmas of no money for gifts, people would sign themselves up for a Christmas Club account to make sure that next year was not another holiday bust.

What happened in the 1970s that rang the death knell of the Christmas Club account? The rise of easy access to credit cards. Rather than having a bad Christmas with few presents, people began putting the holiday on plastic and paying for it for months to come. Nowadays, it’s more common to spend January through March (or April, or May, or June…) paying off the big holiday credit card bills, than to spend those months starting to save for the upcoming holiday season.

Christmas Club accounts are still around! Nearly 72 percent of credit unions offer Christmas Club accounts, in fact. But the interest rates offered are pretty dismal – you’re not likely to earn much money at all (sorry to say). That’s why a few years ago, I started DIYing my own, with a decent interest rate!

Join the Virtual DIY Christmas Club

This year, I invite you to join me: create your own Christmas Club account, deposit into it regularly, and hey – let’s make this thing an actual club!

Together we’ll ensure a Merry Christmas for ourselves and our kin, by saving a little bit of each paycheck throughout the year. We won’t rely on expensive credit card debt. We’ll earn interest on our money, instead of paying interest on our purchases. We’ll have our lists, check them twice, but only pay for gifts once! (True story – with a credit card, if you only make the minimum payment, you often end up paying double!)

How to DIY a Christmas Club Account

Sidebar: if you’re a Habitica player, these steps are available as a 10-gem challenge! Check out the Habitica Christmas Club challenge, and turn the Christmas club into a game!

Step 1: See how much you spent on gifts last year

Use Personal Capital (desktop or mobile app), Mint (desktop or mobile app) or Clarity Money (iOS app) to pull your data and look through your transactions to see what you spent on Christmas gifts in 2016.

Step 2: Determine how much you want to spend on gifts this year

Think about how much you spent last year (Step #1), and what has changed in your life this year that will affect the amount. Do you have a new family member? Got a new job that does Secret Santa? Did you move to a new city and you’ll have to drive or ship presents back home? Plan accordingly!

Or, you could make a list of the people you want to give gifts to this year, and come up with an amount of money you want to spend on each of them. Then add up those dollar values for your total.

Once you have a number in mind, add 15% to it (multiply the number by 1.15). A buffer is always a good idea, because it’s better to save too much than not enough!

Step 3: Figure out when you want to finish your Christmas shopping

Don’t want to be paying for next day shipping on December 23rd, or wandering the mall on December 24th? Pick a date that you want to be done with all of your shopping.

Once you have your date, use this calculator to find the difference between today (“Start Date”) and your final shopping date (“End Date”). Hit “Calculate Duration,” then look under “Alternative time units” to see the number of weeks between now and then.

Step 4: Calculate your Savings per Week needed

Divide the total dollar value from Step #2 by the number of weeks you got in Step #3. This is how much you need to save every week to meet your goal.

Hint: If you get paid bi-weekly it may make more sense to save bi-weekly, right after each paycheck. Double your savings amount and deposit that every two weeks instead of a deposit every week.

Step 5: Open a savings account specifically for the Christmas Club

Even if you already have a savings account, it’s best to section off your Christmas Club money so that it’s clear that it is only for Christmas gift spending. The best way to do this is to put it in its very own savings account, separate from any other savings you have.

There are lots of fee-free savings account options with no minimums that are perfect for your Christmas Club account. Savers in the USA can use Capital One 360 or SmartyPig – both of these let you open sub-accounts (perfect for one sub-account for the Christmas Club) and have opening bonuses for new customers!

I have accounts with both places, and use Capital One 360 for my Christmas Club account currently. But I’m thinking of switching it to SmartyPig this year. They offer an additional bonus (on top of the interest) if you take the money out as an Amazon gift card – the very place where I buy most of my Christmas presents!

Outside the USA? Do a Google search for “[your country] high yield savings account.” Find one with a decent rate, but more importantly no fees or minimums. Then come back to the comments on this post and tell other savers what you found for your country!

Step 6: Make your savings automatic

Log in to the savings account you opened and set up automated weekly, biweekly, semi-monthly, or monthly transfers (depending on how often you get paid). Use the amount you determined in Step #4, of course!

That’s it! Well, almost. One more thing to do…

The Final Step

What makes our virtual Christmas Club an actual club? (Besides that sweet membership card you printed out, of course.) It’s us working together to encourage one another to keep saving! Leave a comment on this post and choose the “notify me of all follow-up comments” option, and you’ll get emails from your fellow Christmas Club savers. Let’s spread the holiday cheer, starting now!

Merry Christmas… everyone!

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