What’s a Christmas Club?

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A Christmas Club might sound like the sort of thing I would be a (the only) member of, but it’s actually a neat old-fashioned way of saving up money for Christmas to give you a tidy lump sum to spend on all the extra food, gifts and toot you’ll inevitably buy in the run-up to Christmas.  Think of it as looking out for your future-self.

One of the (many) advantages of adopting an early-attack approach to Christmas is the ability to time-travel. Take yourself back in time 6 months as the New Year arrived, and with it a stonking great overdraft. The January pay cheque seems so far away, especially when a lot of workers receive a slightly early December salary in the spirit of the season.

Whilst a Christmas Club won’t let you travel backwards to stop you from buying that extra gift for your mum or that extra case of wine because-we’ll-drink-it-anyway, it will give you the chance to spread the Christmas splurge into more manageable chunks in advance, making the dent in the December pay cheque a little less severe.

Getting into the habit of saving isn’t easy, which is where the “club” element comes in.  There are three distinct options you could consider:

  • 1. Sign up to The Post Office Christmas Club

Ideal for: people who are crap at saving and buy a lot of Christmas gifts on the high street

The Post Office Christmas Club operates like a pre-paid card and allows you to top up your card up to £1000 or a minimum of £2 per week throughout the year. From 1st November you can then spend however much you’ve saved up at stacks of big brand shops including Topshop, Debenhams, Argos, B&Q, Toys R Us, House of Fraser, Boots, HMV… the list goes on. You can spend the funds on the card from 1st November – 31st January, so if you have anything left over from gift-buying, you can treat yourself in the sales.

Since the Christmas catalogue company Farepak went bust a few years back, more people got clued up about Christmas savings schemes and came to the conclusion that locking your money into a private company that offers no interest and limited choice at the end of it is probably not a great idea. The Post Office’s scheme is provided by The Bank of Ireland so your money is protected should the worst happen, and the choice of retailers you can shop with covers a decent chunk of the most popular high street stores you would have probably shopped with anyway.  If the sight of savings in your bank account makes you think of booking a holiday rather than saving for a rainy day, then this mittens-on-string option is worth considering.

  • 2. Collect supermarket stamps

Ideal for: loyal supermarket shoppers who want to spread the cost of the epic Christmas food shop

This is an old-school way of saving which offers a little bit of interest on the money you pay in. Now when I say old school, I mean some of the big names (Tesco for example) make you purchase your stamps from a machine that accepts £1 coins and you stick them in a little booklet as you collect them. Not massively secure, since if you lose the card then you’ve lost the money. Other brands like Asda offer an electronic scheme which you can top-up at a till and transfer the balance to another card should you lose your original. Tesco do offer a more accessible savings scheme for Christmas Clubcard vouchers.

The returns vary between 2-4% bonus on the amount you save up, and the money can only be spent with the brand you’ve chosen to save with.  An excellent run-down of the market including the hoops you need to jump through to earn the interest by the Money-Savvy Superhero himself Martin Lewis can be found over on MoneySavingExpert.

If you’re a bit of a tart and switch up your grocery shop to different brands, or prefer to shop online then this isn’t going to work out for you.  However if you’re that guy who collects £1 coins in a jar, then maybe this could be the option for you?

  • 3. Open a savings account just for Christmas

This might seem like a no-brainer, but going-it alone in your Christmas savings club takes self-discipline and willpower not to touch that money until Christmas comes. You could put a few obstacles in your way like going for a Notice account which typically offers a more attractive interest rate than your instant-access accounts because you have to write/call/email/fill in a form 2-6 weeks in advance of when you want the money. I have an instant access cash ISA with a building society which involves a 2 hour train ride early on a Saturday morning if I want to withdraw funds from it. Unsurprisingly its my most successful and stable savings account, because it’s such a darn nuisance to get at it.

Seeing a little savings pot grow and grow throughout the year is encouraging and rewarding in itself, but it also gets you thinking about planning your Christmas spend based on what you’ve got saved up, rather than maxing out your credit cards and paying for it later. I know I’d much rather the interest be added to my savings, rather than my credit card bill.

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