Christmas savings clubs help spread the festive costs

Gifts for her children are already in bags ready for Kellyann Eskisan at the Activity Box in Herne Bay, Kent.

She picked them out weeks ago, but pays for them over several weeks as part of the craft store’s Christmas club.

“It was a stroke of luck,” says Kellyann. “I just put whatever I have left in it. Sometimes it’s £5 or £10 – whatever I can afford walking past the shop.”

While Christmas clubs have long been a way to save for the festive season, some small businesses like The Activity Box are offering them for the first time as the rising cost of living puts pressure on family budgets.

“If I put that money in my bank account, I would end up using it for something else and never pay it back,” says Kellyann.

Customers can spread the cost however they please, but won’t take home the gifts they paid for until mid-December.

Abi Calder, co-owner of the store, says they’ve already decided to offer the same thing year-round.

“The economic crisis will not go away overnight. We know people are worried about their bills,” she says, adding that not only does it help customers cut their budgets, but it’s also good for business. “If we have money, we can fill up the camps,” she says.

Sharron Marriott, who runs Make a House a Home gift shop in Whitchurch, Shropshire, says trust is a big reason her customers choose to save with local shops like hers.

“They know who you are, you are accessible. People like the personal touch,” she says, adding that this year she’s seen an increase in the number of people using her to save for Christmas.

Pearl Norton, who has run a Christmas club at her Starlings toy store in Dereham, Norfolk for many years, shares this sentiment.

“Usually the same people come in, but now other people are doing it,” she says. “We all know it’s going to be a tough year, we’re just trying to do our part.”

Customers are asked to place a 20% deposit on anything they wish to purchase and pay the balance in full by December 15th.

In return, Pearl says, they get the assurance that what they want will be set aside for them, lest they suddenly sell out.

“Interest rates are skyrocketing. As long as they stick to their terms and conditions, we don’t charge anything,” she says.

The average household spends an extra £740 in December, according to the Bank of England.

Christmas clubs are just one way to save for the holiday season.

“They can be useful for people who like to lock their money away so they don’t spend it,” says Sarah Pennells, consumer finance expert at Royal London.

But she explains there can also be downsides, saying consumers should know the rules suit them.

“You might not be able to access those savings if you have an emergency earlier in the year,” she says, adding that it can also limit where and when you can spend the money.

“If you receive a gift card, check the expiration date. We know there’s a lot of money left over on gift cards that expire,” she says.

Crucially, the money is not covered by the Financial Services Compensation Scheme, as is the case when you save at a bank or building society. This means that if the company you are saving with goes out of business, it will not be protected.

Earlier this year, the government announced plans to change the law so that cash held in thrift companies is protected even if the company goes bust.

It aims to prevent a repeat of the 2006 Farepak scandal, when tens of thousands of people lost their money when the Christmas basket club collapsed in administration.

Sarah Pennells says it’s a welcome move.

“People try to do the right thing – to budget all year round – but actually they don’t get the same protection as someone who saves at a bank or building society and that didn’t feel right at all.”

It is unclear whether small companies like Abi’s and Sharron’s, which operate clubs on a more informal basis, would be affected by this law.

Some of the larger companies, like Park Christmas Savings, already provide security by holding their customers’ money in an independent trust.

“There’s a stereotype that older people use Park,” says Katherine Scott, the company’s director of marketing. “But usually it’s women in their 30s, those with growing families.”

While the vast majority of Park’s 400,000 savers started investing earlier this year, Park noted that there was an unusual surge in August this year.

“I think that’s when the cost of living really hit people, especially with the energy bills going up,” explains Katherine.

Park customers receive vouchers at the end of the year which can be redeemed at a number of shops on the main street. The data so far suggests a shift from luxury items to essentials.

“Our customers are very open about who they want to shop with,” explains Katherine. “This year it was mainly the discounters like Aldi, B&M and Home Bargains.

“There’s definitely an impact in trying to find the best price and using the funds they have to buy essentials.”

Many of the major supermarkets run their own Christmas savings clubs, often with incentives such as a bonus based on the total.

Sainsbury’s says it has seen a 48% increase in registrations for its Christmas Club this year.

Having saved on both The Activity Box and Park, Kellyann is already planning for next Christmas.

She opened her park account early to be able to spread the costs over an even longer period.

“It makes life a lot easier,” she says. “I don’t have to worry about having the money to pay for an expensive item. Knowing it’s there and having the ability to pay for it is really helpful.”