Top Eight Places to Stash Cash --
Christmas Club Accounts

3. Christmas Club/Vacation Club Accounts

These often require regular deposits and penalize early withdrawals. They are far less common than in past years, but are still available at many local banks and credit unions.

Who's It For?

Unless you simply cannot save unless you have the psychological edge of saving for a specific goal, there's no good reason to open one of these. There's probably nothing you can do with an event-specific account that you couldn't do with a lot of other savings vehicles. If having a special account for a special event motivates you to save, then it's the right vehicle for you.

Pros

Interest bearing: Christmas club/vacation club accounts usually pay interest at rates similar to a traditional savings account and sometimes slightly higher, says Steven Rick, senior economist with the Credit Union National Association.

Liquid: If you get in a jam and need a little Christmas in July, you can probably access your money.

Check out Bankrate's all-inclusive 2006 Savings Guide. Find inspiration, the best rates and more.

Easy to open and maintain: Frequently there are $1 to $10 minimums to start and they usually don't have balance minimums.

October payoff: Usually, the bank automatically closes the account and sends you a check for the total amount in October.

Single goal: The main advantage of the account is psychological: You stay focused on one savings goal.

Cons

Low earnings: Rates are typically less than for other types of savings vehicles -- sometimes less than regular savings accounts while carrying more restrictions and requirements.

Plenty of rules: There are rules such as requiring periodic deposits, uniform deposit amounts, limited access to money and even to prohibiting deposits in uneven dollar amounts.

Hard to find: These aren't as common as they used to be. If you want to open a vacation club or Christmas club account, you may have to call around a little. Small local banks and credit unions are your best bets.

Withdrawal penalties: These are very much like a regular savings account, in the low interest earned, but unlike a regular savings account by not permitting withdrawals until October. Unless you need the psychological boost, there would be little reason to own one of these. Some savings accounts online and other institutions could also pay better rates and give you almost instant access if you need your money in the meantime.

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Compare Savings Products
	Cost to open	Min bal.	APY*	Insured	At risk	Investment choice	Liquidity
Passbook savings	minimal	usually none	.25 - 5.5	yes	no	no	complete
Money market acct	$1,000 - $50,000	yes	.15 - 5.6	no	no	no	liberal
Christmas /Club acct	minimal	usually 0	.5 - 5.5	yes	no	no	complete
MM mutual funds	$500 - $5,000	often	4.5 - 5.5	yes	no	yes	partial
CDs	$500 - $5,000	usually	.10 - 5.5	yes	no	no	with penalty
529 accounts	minimal	usually 0	n/a **	no	yes	yes	highly restricted
Savings bonds	approx $25	yes	EE bonds - 3.7 I-bonds - 2.41***	yes	no	no	restricted
Treasuries	minimum $1,000	yes	4.66 - 5.08	yes	no	no	restricted