Money tip #3 – Don’t save with Christmas clubs

If you turn on the TV at the moment there is a good chance you will see an advert for a Christmas club with some Z list celebrity telling you how wonderful they are. A Christmas club is a means of saving for Christmas in advance whereby each month you send payments to a company who in turn keep your money safe on your behalf. The idea is that you can't touch the money until just before Christmas when they will send you vouchers, to the value of what you have saved. You can then redeem these against items in their catalogue or with certain high street retailers. Sounds ok? Think again

By sending your money to these clubs rather than put it in a bank yourself you are losing any interest you would have earned on the money. Instead the Christmas club tucks it away and takes the interest!

On top of that when it comes to buying your gifts you are limited to those in their catalogue or to a few high street retailers. However, in this age of Internet shopping why be limited in what you can buy? But perhaps more importantly you almost certainly would get a similar product, as that in their catalogue, a lot cheaper by shopping around. So making your money go even further.

This type of scheme aims to exploit those people who claim to lack the will power to not dip into the money before Christmas. However, while that is admirable, there may be a point where you really have to dip into it but won't be able to. I think I'd rather dip into the Christmas fund to keep a roof over my head if I'm struggling to pay the mortgage than save for Christmas.

But perhaps the more serious question is how safe is your money? In 2006 Farepak collapsed leaving 150,000 customers high and dry just before Christmas. However, the potential for a repeat of such an event has been reduced, thanks to the introduction of the Christmas Prepayment Association.

This self-regulatory body covers a number of Christmas clubs. In theory, if any of those clubs covered by the association goes bust holding customers' money the customers should get back the value of their savings in either vouchers or goods. But in the current economic climate I'd still be nervous about giving them my money.

So what is the alternative? Simply put your money in a bank account and exert a bit of will power is the obvious thing to do. However, for those people who really can't stop themselves from raiding the Christmas fund in anything other than an emergency there are one or two building societies out there that do Christmas accounts. These work in the same way as ordinary bank accounts (i.e. pay interest) but give you limited access throughout the year. But, in the case of an emergency you can still close the account and withdraw the funds at anytime.

So before you join that Christmas club off the back of one of those rubbish adverts there is an easier way to save which not only rewards you but could make your money go that bit further when you come to spend it.

KERRRCHING!!!