Christmas club account

What It Means

A Christmas club account is a savings accountSavings accountA bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions. See more you make regular deposits into over the year so there's money for holiday shopping. At the end of the club period, the bank or credit unionCredit unionA not-for-profit financial cooperative owned by its members, offering accounts and loans to people within the field of membership its charter sets. See more pays out the balance, for example by moving it into your checking accountChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more, as TD Bank's help center describes. Each institution sets its own rules for interestInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more, deposit amounts, the payout date and early withdrawals.

How It Sounds at Home

• "I put $20 a week in the Christmas club."
• "The club money just landed in my checking."
• "That's what the Christmas club is for."

The Breakdown

Worked example. A family wants $1,000 for gifts and holiday meals. With a full year until the payout, each deposit works out to:

Starting later raises the amount. Nine months out, weekly deposits drop to 39 and each one rises to $25.64.

What the result means. A Christmas club is a bank's version of a sinking fundSinking fundMoney set aside in small, regular amounts for a known future cost, so the bill doesn't land on a single paycheck. See more: one known cost, a date, and small amounts set aside until then. The deposit figure is the number to plan your budgetBudgetA plan for a set period, usually a month, that lists the money you expect to receive and how you'll spend or save it. See more around, since any interest the account pays varies by institution.

Questions to ask before you open one

1. What interest does it pay, if any?
2. When does it pay out, and where does the money go?
3. What happens if you withdraw early or miss a deposit?
4. Is there a minimum deposit or a fee?

Good to Know

Terms differ between banks and credit unions, so read the account agreement for the interest rate, any minimum deposit, the payout date and what an early withdrawal costs. The FDIC insures deposit accounts, savings accounts included, up to $250,000 per depositor, per ownership category, at each FDIC-insured bank, and all your deposits in the same ownership category at that bank count toward one limit. At a federally insured credit union, NCUA share insurance covers member accounts.

Related Terms and Categories

• Sinking fund

  Money set aside in small, regular amounts for a known future cost, so the bill doesn't land on a single paycheck.

• Holiday budget

  A spending plan for the holiday season that sets how much you'll spend on gifts, food, travel and decorations before the shopping starts.

• Gift budget

  A spending plan that sets how much you'll spend on gifts, person by person or occasion by occasion, for a season or a whole year.

• Savings account

  A bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions.

Household money and budgeting