Christmas Clubs: Financial Wellness Since Before It Was Cool

Christmas Club savings accounts have been around for so long that they’re often taken for granted. There’s a reason for that. They work.

“The Christmas Club remains popular because people understand and appreciate the principle of saving for something important,” says Fred Trusty, executive vice president and chief marketing officer at Redstone Federal Credit Union ($5.0B, Huntsville, AL).

The big Alabama credit union had 73,697 Christmas Club accounts this year with balances totaling nearly $60.4 million, or $819 per account.

There are variations on the theme, but they basically work the same at each institution.

“People establish the account in January and make contributions through October,” explains Chet Kimmell, president and CEO of Neighborhood Credit Union ($633.4M, Dallas, TX). “They get their funds on Nov. 1 of each year. Our program has remained the same for decades.”

A key to making it work is convenience. For example, at Ascend Federal Credit Union ($2.1B, Tullahoma, TN), accountholders can make direct deposits each pay period or transfer funds online or by telephone. The credit union then rolls deposits into a checking or savings account on the first business day after Oct. 31.

The Christmas Club remains popular because people understand and appreciate the principle of saving for something important.

Rachel Carrick, assistant vice president of marketing at the Nashville-area financial cooperative, says Ascend has offered Christmas Club accounts for at least 20 years. This year, the credit union had 5,892 of the accounts with total deposits of $15.8 million, an average of $2,681 per account.

Like many others, Ascend allows penalty-free access to the founds throughout the year, and only $4.9 million, or $826 per account, was left when the holiday spending season arrived.

That’s because members use the accounts to put aside savings for things other than Christmas. That idea, in fact, is included in this wording on the credit union’s Christmas Club webpage: “Don’t let the name fool you! Use your Ascend Christmas Club account to save for yearly gift-giving, a vacation, a special purchase, and more. Make saving simple with automatic transfers.”

“We market our Christmas Club account as one that can be used for holiday saving or for whatever the member wants,” Carrick says.

Neighborhood FCU doesn’t market them at all, beyond its webpage.

Neighborhood Credit Union doesn't have a large demand for its Christmas Savings Club, but the account does serve a specific niche, says CEO Chet Kimmell.

“We don’t market the Christmas Club because historically there has been little demand for it,” Kimmel says, adding that approximately 75 members used it this year to save about $100,000.

“It’s only a few people, but the account does serve a particular niche for savers who have that purpose in mind,” the Neighborhood FCU chief executive says. He says the credit union’s Prize Savings Accounts, which rewards savings with raffle prizes and cash, are far more popular.

That said, Kimmell says, many of that small crowd of Christmas Club savers have been using the account “for years and years.”

We view it as a product that promotes financial stewardship, so members can avoid the excessive burden of credit after the holidays.

“There definitely is a psychological aspect to these accounts,” adds Carrick, the marketing AVP at Ascend. “Members like the ‘fund it and forget it’ aspect, and many use the Christmas branding to tell themselves this is a special account that should only be accessed for the holidays or another savings goal.”

In other words, Christmas Club accounts have been a kind of financial wellness or literacy idea since before those concepts gained currency. They help enforce a savings ethic, and even a small amount of savings has been shown to have a marked effect on a household’s financial resiliency.

Plus, many credit unions sweeten the pot by offering a slightly higher interest rate than standard savings accounts.

“We view it as a product that promotes financial stewardship, so members can avoid the excessive burden of credit after the holidays,” Carrick says.

Redstone, which launched its Christmas Club more than 25 years ago, takes the same approach.

“The Christmas Club is just one of the many ways we encourage savings and budgeting,” says EVP/CMO Trusty. “For those who participate, it feels pretty nice to get a windfall each November.”