Innovations and Payment Systems

Savings clubs: Not just for Christmas anymore


Small banks and credit unions have extended the Christmas Club tradition to encourage savings for both good times and bad

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If you’re trying to figure out how to save up for a big expense, such as a vacation or wedding, join the club.

No, it’s not just a figure of speech.

Many financial institutions allow you to set money aside on a monthly basis, and then let you withdraw it at a certain time of the year, or when you reach your goal.

Savings clubs: Not just for Christmas any more

You might be familiar with Christmas club accounts, but various credit unions and banks have clubs for just about everything — from saving up for your tax payment, to paying for your heat bill, to paying for your daughter’s quincea\xf1era — a 15th birthday celebration common among Hispanic girls.

And some let you designate the club accounts for any purpose you prefer.

Such accounts, “are a great way to get yourself in the habit of savings,” says Wes Strickland, senior vice president of marketing at Grow Financial Federal Credit Union in Tampa, Fla.

If you know an expense is looming, socking money away regularly in a club account can help you avoid racking up credit card charges or digging into your emergency savings to cover your costs.

For many consumers, saving money can be challenging because “there’s so much temptation and so many things to spend it on,” says Barbara O’Neill, a professor of financial resource management in the Department of Agricultural, Food and Resource Economics at Rutgers University-New Brunswick in New Jersey.

“It’s so easy to swipe a debit card,” says O’Neill. “Psychologically, people are less likely to take money out if it’s in savings or invested.”

Understand savings club details

Because the terms vary for these accounts, you need to make sure you understand all the details if you’re considering opening one at your credit union or bank.

Often you’ll be required to deposit money at regular intervals, such as once a month, and can only withdraw your savings at a certain time of the year. So if you open a vacation club account, for example, you might be required to open the account in May of Year 1 and withdraw the entire amount in May of Year 2.

If you need to tap into that cash sooner, you might be forced to close the account, forfeit the interest you would have earned or pay a penalty. While those restrictions might seem onerous, it’s a good way to keep you from being tempted to dip into your savings prematurely.

There also might be limits as to how much money you can set aside each month, or on the total amount you can keep in your account, such as $1,000 or $5,000.

And most of these accounts aren’t going to make you rich. They’ll often pay interest rates that are similar to your regular savings account, though some pay much better. As of early 2014, the average savings rate nationwide is 0.12 percent APY, according to Yet some of the club accounts pay 0.50 percent APY or more.

Some of the accounts require an automatic deposit from another savings or checking account that you have with the same financial institution.

“If you save every month right out of your paycheck, you don’t have it to spend,” Strickland says.

“Putting a little aside for any kind of big expense makes a lot of sense,” says Mike Schenk, vice president of economics and statistics with the Credit Union National Association.

Costs for these expenses can quickly add up. For 2013, the average American expected to spend $1,145 per person for their summer vacation. And an average wedding costs a staggering $28,000 in 2013, according to

For savings club, try a credit union

You’re more likely to find club accounts at credit unions, although some banks offer them as well.

“Vacation clubs are worthy, but not very profitable,” says Ben Rogers, research director at the Filene Institute, a think tank supported by the credit union industry. Because credit unions are nonprofits owned by their members, they’re more likely to offer such accounts.

At the same time, both credit unions and banks are influenced by consumer behavior, and “a lot of people prefer the spend-first-pay-later version of a vacation,” Rogers says.

Putting a little aside for any kind of big expense makes a lot of sense.

— Mike Schenk
Credit Union National Association

Online alternative
If you prefer online savings to brick-and-mortar financial institutions, allows you to establish savings goals and then share them via social media.

Goals range the gamut from paying off credit card debt to saving for property taxes to saving for a new baby.

Some goals, such as saving for a baby, take months, while others, such as saving for a down payment on a house, can take years, says SmartyPig co-founder Jon Gaskell.

Often people share their goals via Facebook or Twitter and friends and family members can contribute to the cause, Gaskell says.

Nearly 70 percent of SmartyPig savers reach their goal within 30 days of their target, and about one-third set a new goal within 24 hours of hitting their last one.

“It really helps you be disciplined in your savings,” Gaskell says.

Tips: Be specific, tell others
O’Neill favors setting long-term goals and sharing them with others. That way, “You have people looking over your shoulder.”

It also helps to be as specific as possible about the amount you want to save and your target date, such as setting aside $10,000 toward the price of a new car two years from now, she says.

Club accounts are designed to help you so you can cover expected expenses. And surveys and statistics show Americans generally do a woeful job of saving.

In December 2013, personal savings as a percentage of disposal income was just 3.9 percent, compared to 4.3 percent in November, according to the U.S. Bureau of Economic Analysis.

Only one-third of American households feel prepared for their financial futures, a February 2014 survey by the Consumer Federation of America found. And just 51 percent of us have “a savings plan with specific goals.”

The subaccount method
Want to get specific? Some financial institutions can set up different club subaccounts for different purposes.

Having various club accounts “makes sense from an organizational standpoint,” McClary says.

Navy Federal Credit Union based in Vienna, Va., for example, offers Custom Club accounts, which allow you to establish accounts for any purpose, with terms ranging from three months to five years.

What you name the accounts is “only limited by your imagination,” says Michael Christian, assistant vice president of savings and checking.

That way you can budget and plan ahead, rather than borrowing to cover anticipated expenses.

“Savings is a lifestyle choice. It becomes addictive,” Christian says.

Here’s a sampling of the types of club accounts available around the country.
Name of club accountFeaturesOffered by
Fuel ClubLets you prepare for the cost of heat in New England winters. The account runs from September to September and the money is disbursed in time for you to cover your first big heating bill.River Works Credit Union, Lynn, Mass.
Project QuinceA traditional quincea\xf1era to celebrate Hispanic girls’ 15th birthday can be costly, so the Project Quince account pays 0.35% APY on the account, and once you hit $10,000, the credit union will give you a bonus of $100.Grow Financial Federal Credit Union, Tampa, Fla.
Vacation ClubTo save up for your summer holiday, this club account takes deposits for a year beginning in May. The following May, the money is transferred into your checking or savings account.Municipal Credit Union, New York City
Storm SaversAllows you to put money away so you’re ready for an evacuation or weather-related emergency, then transfers savings to a regular account for easy access.Greater New Orleans Federal Credit Union
MatriMoney AccountYou can save for your wedding day with this account, which allows you to make withdrawals at any time to cover wedding expenses. The balance is transferred to your main savings account after 12 months.Heartland Credit Union, Springfield, Ill.
Tax ClubEven federal government employees can worry about the tax man, so the Tax Club sets aside money from each paycheck for a year, beginning in March, so it’s there if you need it when taxes are due in April.U.S. Postal Service Federal Credit Union in Clinton, Md.
Summer SaverWhen school’s out for the summer, some school employees have to do without paychecks, and the Summer Saver can get them through. It pays 3% APY, accumulates with monthly deposits, then transfers to a regular account on a date the owner specifies.SchoolsFirst Federal Credit Union, Santa Ana, Calif.
Dream AccountPut cash aside for any purpose with an account that pays 0.95% APY, plus a 2.5% bonus on the interest if you make deposits for six consecutive months, and another bonus if make no withdrawals for six straight months.Barclays Bank online
SmartyPigSet your goals with SmartyPig and you can earn 1% APY. You can share your goals via Facebook or Twitter, and others can pitch in to help you reach your goal even quicker.SmartyPig online

See related: Debt vs. savings: Who gets paid first?

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