What is a Savings Club?

Felicia Dye

Savings club is a term often used to refer to one of three types of arrangements. First, it can refer to a method of contributing funds to an account for a specific purpose. Second, a savings club can be an awards program whereby certain parties contribute to an account for another. The third type refers to membership programs that offer savings to participating consumers.

If the account is a Christmas club, the accumulated funds will be sent to the account holder during the holiday season.
If the account is a Christmas club, the accumulated funds will be sent to the account holder during the holiday season.

The first type of savings club refers to a program that operates similar to a savings account but which is generally designed to accumulate funds for a specific purpose. The goal is achieved by regularly depositing a set amount of money with a financial institution. One of the most common types of these accounts is known as a Christmas club.

Some savings clubs are targeted toward college tuition.
Some savings clubs are targeted toward college tuition.

This type of savings club generally requires a person to decide how much she would like to contribute weekly. Usually, the financial institution where the account is opened will issue a book of coupons, which are similar to deposit slips, that have the expected deposit amount pre-printed. Each week an individual will remove a coupon and make a deposit for the same set amount.

This may sound similar to a regular savings account, but there are several differences. Withdrawals may be discouraged by making them subject to fees. With a regular savings account, when a person wants her money, she must withdraw it. With a savings club, the funds are usually automatically disbursed. If the account is a Christmas club, for example, all of the accumulated funds will generally be sent to the account holder during the holiday shopping season.

The second type of savings club is one that offers rewards in the form of monetary deposits for certain consumers. These plans are often marketed as beneficial for people who will be responsible for college tuition in the future. Participants in these programs generally earn savings when they conduct business with certain companies or use certain credit cards. A percentage of such transactions is usually contributed to special accounts where the funds can accumulate for future use.

The third type of savings club is a membership program that also offers savings to consumers. In this instance, however, there generally is no account where funds accumulate. Instead, savings come in the form of discounts offered to those who join the program. These programs may require fees for participation or the purchase of cards that are to be presented by consumers when they patronize certain businesses.

With a Christmas club, all of the accumulated funds will generally be sent to the account holder during the holiday shopping season.
With a Christmas club, all of the accumulated funds will generally be sent to the account holder during the holiday shopping season.

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