As Australians are reminded of their holiday spending habits with incoming credit card statements and ‘buy now, pay later’ payments falling due, the Customer Owned Banking Association (COBA) is encouraging Australians to think beyond credit this New Year and start to set smart savings goals for 2021.
Christmas Club accounts have been around for more than 100 years, but have fallen out of favour in a time of credit cards and now buy now, pay later.
Christmas Club accounts work as short-term savings accounts that encourage people to put a small amount away each week, even as little as $50. Unlike a regular savings account, people can only access the funds during a specified time of year, usually in the lead up to and shortly after the Christmas holiday period.
These accounts provide a tried-and-tested alternative to current credit lending options. Alongside traditional credit card lending, the rapid rise of buy now, pay later schemes are making it easier for customers to swiftly build up significant debt – even through seemingly small transactions. ASIC findings show 1 in 5 customers missed a buy now, pay later repayment in the 2018-19 financial year.
As more Australians rediscover the benefits of smart budgeting (thanks to the popularity of the Barefoot Investor), COBA is encouraging a new look at this clever product.
Customer Owned Banking CEO, Mike Lawrence, says Christmas Club accounts are a helpful way for Australians to manage lumpy expenses at a crucial time of year and are effective in helping a new generation of Australians to learn to set savings goals and track their budget throughout the year.
“With the rise of buy now, pay later schemes, we’re seeing a younger generation develop an appetite for credit culture. However, consumers need to be mindful of impulse buying and rapidly accumulating debt through these schemes. If you’re not good at managing your spending or tracking payments, debt can spiral, and late payment fees will add to the burden.”
Lawrence says Christmas Club accounts are just one example of the many ways that customer-owned banking institutions can help their customers manage their money wisely.
“Christmas Club accounts are a customer-focused product that helps customers plan ahead and set savings goals that will leave them with a sense of relief rather than dread after the holidays are over.”
Mr Lawrence added: “As an alternative option to manage holiday spending, Christmas Club accounts are a great way to consistently build on your savings throughout the year.”
To locate a customer-owned banking institution and learn more about Christmas Club accounts and related savings options, simply visit the member listing on the COBA website.
