Sears Brings Back the Christmas Club
Remember when people used to save for future expenses like vacations and Christmas?
"While it's still sunny out, it's time to start thinking about a way to make sure Christmas is merry this year," said
Financial planners say the concept's time has come -- or come back, rather -- in the wake of the still-lingering economic malaise.
Christmas clubs, first popularized during the Great Depression, were a way that frugal families could budget for costly events that loomed in the not-too-distant future. By putting money away in advance, savers were able to spend more freely and avoid the now too-familiar holiday debt hangover that can linger for months after the gifts are long forgotten.
Christmas club accounts have never been high return. In fact, they died out after banks started charging so many fees on the accounts that they became the plot of an episode of the 1940s radio program "Life of Riley" in which the show's hapless hero went to withdraw his Christmas club deposit, only to discover that he owed the bank more than he had saved.
But planners say you don't need
And, while it's easy to get distracted by the promised bonus, the real savings is in avoiding interest charges you would pay on a revolving credit account. Credit card issuers are now charging as much as 29.9 percent on revolving balances, so if a cardholder spent
That makes saving in a dedicated account for Christmas an attractive idea, even though you'll earn only negligible returns on your deposits. And that's the case when you set up a small savings account at most banks and credit unions today. Some financial planners add that you shouldn't stop with Christmas savings.
"It's brilliant to save in advance for fun things like Christmas, vacations and even graduations," said
The catch? There are some restrictions to dissuade short-term profiteers, including one that says you'll get the 3 percent bonus only if you "activate" your card before
In addition, you must spend the money you've saved at
On the bright side, there's no expiration date. So, your Christmas club savings could just as easily be spent on a washing machine or lawn mower in July as on holiday presents.
If you're not a
"You can request that a certain amount of your paycheck be automatically placed in this separate account," McClary said. "Then you have the same amount deposited every month or every two weeks when you get paid."
The accounts won't make you rich. If you manage to save
"The bright side of the recession is that it really shook people up and made them think about how they were spending," Martindale said. "This trend of only spending money that you have is a very healthy thing."
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Personal Finance - Sears Brings Back the Christmas Club
(c) 2010 Kathy Kristof