Save to spend


POSTED: Monday, February 08, 2010

Waiting for that post-holiday credit card bill is kind of like waiting for a prison sentence: You know you'll be in for a long time, you just don't have an exact count.

Believe me, I'm still paying for a 46-inch LCD HDTV set I Secret Santa'd for myself last year. And I only call it Secret Santa because nobody knows about my habit of buying myself big-ticket items for Christmas. This is my first column, so I guess I shouldn't be keeping secrets. The better to know you, dear reader.

So you received the bill in the mail, and you're probably telling yourself that you'll be better this year. Here's the deal: It's easy to keep that promise if you depend on that ancient, last-century savings staple, the Christmas club savings account.

Borne out of the Great Depression, it's only fitting that this savings tactic might help get some people through the year as the nation crawls out of the current Great Recession.

The concept originated in Pennsylvania. The idea, from Carlisle Trust Co. treasurer Merkel Landis, was to assign deposit slips to customers and issue cashier's checks to members before the end of the year.

“;It is a tried-and-true tactic,”; says Gary Fujitani, executive vice president of the Hawaii Bankers Association, who uses a Christmas club account. “;What we're finding at the banks is that consumers are automatically starting to put away more savings not even necessarily for Christmas, but for a rainy day fund.”;

The account is a short-term, minimal-commitment savings account at a bank or credit union, a companion to a checking account meant to take monthly deductions from your paycheck. For example, depositing $10 each week from January through October would save you more than $400 easily.

“;They can even start opening as of the last November,”; says Ed Char, First Hawaiian Bank's vice president of deposit products. “;Come the end of October, that's when the account matures and typically when people might start their shopping.”;

For First Hawaiian's account, the only penalty for withdrawing money is that the account must be closed entirely, plus you lose the accrued interest.

Christmas club accounts typically have low-yielding interests anyway. Char said for more flexibility, customers could open a regular savings account.

“;That works for some people, provided they need the liquidity to access the money,”; he said.

The less disciplined of us might consider not even getting an ATM card. The harder it is to get the money, the harder it is to spend it.

“;People are just looking for a vehicle to save,”; Char said. “;It's more about the discipline of saving.”;

Bank of Hawaii doesn't offer a Christmas club account, but has a bonus rating savings product that can be self-structured to save for any reason, says Gail Evers, the bank's product manager.

“;They'll get a bonus interest in addition to their regular interest,”; Evers said. “;And they are competitive. We have higher rates for higher balances.”;

Evers says the bank always encourages customers to take payroll deductions to save for rainy days or other goals like education, weddings and holiday travel.

The Hawaii Bankers Association also recommends limiting using credit for holiday spending. If credit must be used, use only one card, preferably with the lowest interest rate.

First Hawaiian's Char said savings can come from sources outside of your paycheck—tax refunds, Christmas money, bonuses.

“;Frankly, it's very good if you have younger children,”; he says. “;Christmas club accounts have been around for many, many years, and it's been a steady and consistent vehicle.”;

”;Here's the Deal”; helps consumers stretch dollars in these tough economic times. It runs every other Monday. E-mail Gene Park at .(JavaScript must be enabled to view this email address).