An Old-Fashioned Holiday (Spending Plan)
In digital era, layaways and Christmas clubs remain budget-friendly options
A recent holiday shopping survey brought good news and bad news for consumers: While 65 percent of 2,000 U.S. adults polled by Coinstar reported that they intend to set a budget for what they’ll spend this season, 77 percent also expect their spending to exceed the amount they’ve allotted. That means that even savvy, well-intentioned pre-holiday planners will likely need to set another budget at the start of the new year to recover from their overindulgences.
It’s a useful time for a reminder then, that even in our digital era of mobile payments that make it simple to charge holiday purchases to a credit card account with a wave or tap of your smartphone, a couple of old-fashioned budgeting mechanisms remain viable options for spenders, careful or otherwise: layaways and Christmas clubs.
Walmart offers one of the more robust layaway programs among major retailers — customers are required to put 10 percent down or $10 (whichever is greater) but there is no charge to open a layaway account. There are minimums — individual items must cost at least $10 to qualify, and the total cost of layaway purchases must be more than $50. Layaways can only be purchased in-store — no online orders — and must be paid off by Dec. 11.
Other retailers offering no-interest layaway programs during the holiday shopping season include Sears, Kmart, Toys R Us/Babies R Us, Burlington Coat Factory and H-E-B plus!. Kmart offers a layaway option that requires a down payment of just $1, while some other retailers waive the down payment entirely to holiday shoppers.
Layaway is a Depression-era purchasing method that offers retailers the chance to sell to customers that may have little to no credit at a diminished risk: If the items put on layaway aren’t paid off in time, they go back into the store inventory, and the customer usually pays a minimal cancellation fee. It’s a system that was fading in popularity and had all but vanished — until the Great Recession of 2009 once again made it a useful option for those on both ends of a transaction.
The same is true for Christmas clubs, savings accounts offered by banks and credit unions that enable customers to squirrel away a recurring portion of their deposits on a set schedule. The money then becomes available at the holiday season, when it can help buy gifts and other seasonal splurges. Typically, the accounts have low interest rates and there are penalties for large or early withdrawals, encouraging a disciplined approach to saving and spending.
Though few of the bigger financial institutions offer such clubs anymore — many offer year-round automatic savings plans that function similarly, though without a set funds-release date — the 2009 recession spurred a rebirth in Christmas clubs at smaller, local credit unions. Last holiday season, nearly 75 percent of credit unions offered Christmas clubs, according to the Credit Union National Association.