What do you think of when you hear Christmas Club? Do you think of your grandmother going to the bank every week and depositing a little bit so that when Christmas rolled around she had a nice little chunk of savings to spoil you and all her other grandchildren with?
But wait, there’s more. How about a Vacation Club? And no, I’m not talking Disney. This is an account where you save up a little at a time so when you’re ready to jump on that cruise it’s all paid for.
Well, guess what? In today’s economic times, folks are thinking about using this type of forced savings again rather than relying on credit cards. I love it.
Today’s club accounts are more politically correct and are called Holiday Club accounts, and the Vacation Club is something Gramma may not have used, but the premise remains the same. Put a little aside today for what you know you’ll need tomorrow. And with today’s innovations like direct deposit and internet banking, there is no need to make that trip to the bank every week. Just have a little taken out of your paycheck every week or do an online transfer every time you have a little extra after paying the bills.
Some club accounts will let you take as many as four penalty free withdrawals per year. What happens four times a year? Well in my neighborhood, my friendly tax collector pops in to get quarterly real estate taxes. Maybe you could use a Club to plan for taxes if you’re not already escrowing them with your mortgage? And what's different from a regular savings account? You don't have access to withdrawal the funds without penalty until its time.
So join the club. It’s a great opportunity to turn the tables and EARN some interest rather then PAYING it.