Did you have a Christmas Club account when you were young? The author of this Libertyville Patch article reminisces about the Christmas Club account she had at a community bank when she was a child. She also reviews the state of Christmas savings accounts today. You probably won't find them at the large banks, but they're still around at your local banks and credit unions.
A Christmas club account is a special savings account that encourages people to make deposits during the year. They usually have a low minimum deposit requirement, and allow deposits any time during the year. Regular deposits like payroll deduction are often encouraged. Near the end of the year, you are allowed to withdraw the full balance for Christmas shopping. Often, the credit union will automatically transfer the balance to your checking account in November or December. These accounts are also called holiday club accounts.
Christmas club accounts can be useful to teach kids to save, and they can be useful to encourage adults to save for Christmas rather than depending on their credit cards.
To find credit unions and banks that offer these accounts, you can use our table of Christmas Club accounts. This table was originally intended to be for installment savings accounts like what Wilshire State Bank offers, but since there weren't enough of these accounts, we included Christmas club accounts in the table.
Online Options for Christmas Club Accounts
Several internet banks offer kids savings accounts that can be useful for kids to build up savings for the holidays.
One new bank is Airbanking, the internet division of MainStreet Bank. It offers an account called Junior airsavings which offers 4.00% APY for balances up to $1,000 and 0.95% APY for over (as of 12/05/2011). It's for account holders up to age 18, and a parent or guardian is required to open a deposit account in order to qualify for this program. The high interest rate for small balances is a nice feature to teach your child about interest.
ING Direct now offers a savings account and a checking account for kids. These are opened as joint accounts between a parent and the child with the child having limited account permissions. I reviewed ING Direct's Kids Savings Account last year, and the new ING Direct teen checking account in November.
The internet bank that offers a savings account that's most like a club account is SmartyPig. You can open an account for yourself and your child. Then you can set up a Christmas goal (or any goal). Your child can make deposits into your local checking account that links to the SmartyPig account. Regular and one-time deposits can then be made into the SmartyPig account from that checking account.
Before Christmas you and your child can put those savings back into your linked checking account or onto a retailer gift card. The benefit of SmartyPig over other online banks is that SmartyPig makes it easy to redeem the savings into gift cards that add up to 11% to the savings. You can see the cash back percentages at this SmartyPig Retailers Gift Card page. Percentage amounts of 3% to 5% are the most common.
SmartyPig used to have another advantage over the other online banks. That used to be a higher interest rate, but as we learned on Friday, that is changing.