Many people would like to stay prepared financially before the festive season. By thinking about those people, financial intermediaries bring new types of savings account.
It ultimately helps common people to spend without thinking much because they have saved money for only the purpose of a particular occasion.
Unlike the Traveling savings account, the Christmas Club account is such an initiative by financial intermediaries to assist people in saving money for the festival.
When a person opens such an account, it drives out the worry of expenditure during the festive season. As a result, a person can shop as much as he wants and purchasing lots of gifts hardly matters.
Indeed, it has ample benefits. However, for some people, these types of holiday accounts do not ultimately serve any good to people. We will discuss about everything so that you will get a clear picture of this special account.
What is Christmas Club Savings Account?
There are different types of savings account e.g. short term, lifetime and renewable. When it comes to the matter of holiday account like Christmas, it generally comes under a short-term savings account. This is because such an account helps save money as per the requirement of a person’s festival expenses.
By opening this account, a person can save money every month. He does so after planning the entire festive expenses, including shopping expenses, Christmas tree decorating equipment expenses, travelling expenses, etc.
First, one needs to calculate all of those expenses, and after calculating the total, one should divide the entire amount into 12 months. After that, open a Christmas club savings account and deposit as per the estimated savings plan.
However, the only benefit of opening such a bank account is to get some extra interest upon the saved amount. So, save money even if you hardly planning about Christmas expenses. No financial intermediaries will cast a look.
What are you doing with the fund? Yes, the only thing that will happen is, you can’t keep the amount within the account for a long time.
Operating nature of a Christmas Club Account
Usually, the ideal time for opening a Christmas Club account is in January. As it is a short-term savings account, one can run this type of account for 12 months at the max. However, many people failed to open such accounts due to fund issues at the beginning of the year. However, it is better to open the account at the very beginning of the year.
If you can open such an account at the beginning of the year, then it will work even if you save a low amount of money. Different people choose different savings plans. While some like to choose monthly payments, others may find comfort in saving money weekly. How much money you will save ultimately depends upon your total expense amount.
But one thing you must assure that there should not be any lack of payment during this 1 year. If an account holder skips a single payment, then it will ruin the entire savings plan. Moreover, there are some financial intermediaries which impose multiple rules and regulations on Christmas Club account.
Indeed, you want to save money in such an account that is of fewer restrictions. Above all, you need to find out that particular intermediaries do not impose a massive restriction upon the Christmas Club account. After completing the term, just before Christmas, one can easily withdraw the entire fund.
Usually, financial intermediaries are used to offering a minimum of 5% and a maximum of 15% interest rate. There is no doubt that a 15% rate is applicable for those who keep the lump-sum amount. However, if you cannot save money for fund shortage, then apply for personal loans, which direct lenders offer for financially unstable people on benefits.
Advantages of opening Christmas Club Account
If you are good at finance management then surely you will like this type of holiday account. For all of us, Christmas is a great festival and not only in European countries but also in several other regions Christmas is celebrated with grandeur. To drive out all the financial hindrances from the place of spontaneous enjoyment, you must pre-plan the expenses.
When you are thinking about pre-plan expenditure, nothing is better than opening a Christmas Club account. Thus, some of the advantages of opening such an account include,
It will oblige to save
Perhaps you try a lot but are unable to save money due to multiple reasons. As a result, you are unable to spend money as per your wish. Indeed, you do not want to face any financial crisis during festival season. So, to avoid such a scenario, you should open a Christmas Club savings account.
The system will compel you to save money. On the one hand, you will start preparing yourself financially to spend on special occasions. On the other hand, it will grow up the habit of savings within you.
A short term savings plan
There are several other savings plans available within the market. Some of them offer high returns, while some others may provide a medium return. Generally, the Christmas Club account will provide you with a medium return within a very limited period. Moreover, there is enough flexibility with this type of savings account.
One can quickly transfer the amount from a Christmas savings account to any other regular savings account during maturity. This flexibility of shifting money makes it easy for people to utilise the fund.
Good rate of interest
The rate of interest provided in this account is usually higher than a standard savings account. A good rate of interest is something that can attract anybody. The only reason for saving money in this account is a high return. Beginning from 5% to 15%, interest is provided on the saved amount.
So, if you want to enjoy the special day with a good amount of savings, try to open a Christmas Club account. Many investors even use this particular short term investment for getting a lump sum amount.
Curtail down credit card bills
When you do not have enough money in hand, then you have only two options left in hand. Either you need to borrow from direct lenders or require using a credit card. Whatever method you will try, always remember that it will enhance the debt amount and nothing else.
So, if you do not want to fall into unwanted debt, try to open this savings account. In this way, you can curtail down credit card bills.
Disadvantages of opening Christmas Club Account
Although this type of savings plan is widely acceptable to many good people, some finance experts criticise such an account. According to them, even if a person saves money through this plan, he still needs to borrow from credit cards or money lenders. They showed some reasons for their claim. These are,
A small amount of money hardly works
Critiques found out that even if a person saves money for a long year, still it can’t fulfil the necessity of expense. One needs to borrow money because it is a short term savings plan. Moreover, even if a middle-class person saves 1000 Pounds monthly, still it will only become 12000 Pounds which are not enough.
Any withdrawal is supposed to be the penalty
If an account holder withdraws money before maturity, then he is liable to pay the penalty. Generally, the penalty will not impose upon the principal amount. Instead, it will only be imposed on the interest amount. Therefore, even if you save money, you can’t access it in an emergency need. However, you may borrow loans for the unemployed from a direct lender to cope with an emergency.
Before opening a Christmas Club savings account, it is better to think about these cons. Only after that, you should open this type of account.