How to Save for Next Year’s Holiday
If you want to have enough money to spend next season, start saving for it right now. Following are options that will help to keep your holidays debt-free for years to come:

Money Market Accounts are the best way to save for your purchases. The interest rates are just a little bit higher than what you would receive from a basic savings account. At the same time, your money is not locked away as it would be with a certificate of deposit, or CD (however, you might want to consider a short-term CD account, which could be a good bet if you can add to it as you go along; check with your local bank for details such as penalties for early withdrawal).

Christmas Club Accounts are another good choice for those who never have cash on hand to pay for Christmas-related expenses. Old-fashioned as they may seem, Christmas Clubs offer a time-honored, convenient way to plan for future purchases. Bear in mind that your interest rates will be low. Yet, it’s much cheaper to save in a club that pays little or no interest than to borrow with high interest-rate cards that will cost you for months or years to come.

Christmas Clubs are very simple: Whenever you have a little extra cash, deposit it into your account (even five dollars at a time will do). This money really does start to build during the year, so start now to maximize your funds. A month or two before Christmas (you select the date) you get a check or automatic transfer to your regular account for the entire amount, plus interest. Better yet, you’ve got an incentive not to touch that money during the year, because you will be penalized for early withdrawal. To make it easier, use direct deposit to deduct the money from your paychecks automatically. This way, you won’t miss what you never had in your hands in the first place.

As an added benefit, most clubs will arrange separate accounts for the kids as well as mom and dad. Every time your children put a dollar or two into an account from allowance or chore money, you can easily provide matching funds so they can watch their money grow.

Before opening a Christmas Club account, you should do a little research to find one that will work best for you. To make an informed decision, read the following:

• What is the interest rate? This is important as some club accounts pay higher interest than regular accounts, some pay less, and others pay no interest at all.
  
  
• Will you have access to the funds earlier than planned, if you need them? Keep in mind that some accounts prevent early withdrawals, some penalize heavily, and others very little. The rest will require you to close out the account altogether, instead of releasing your money early. You need to know what the rules are in advance so that you are prepared.

If you belong to a credit union, it’s a good place to go for a Christmas Club account, as most do offer them. According to a 2001 year-end survey by the Credit Union National Association, 75 percent of credit unions nationwide offer Christmas club accounts, providing access to 85 percent of their members.

If you do not belong to a credit union, then find out what your bank will do for you. The American Bankers Association stated in their 2001 retail banking survey that 68% of banks offer some type of “club” account. Smaller community banks are a great resource for Christmas Club accounts as most still offer them.