How Christmas Savings Programs Work

The concept behind a Christmas Savings Program, also known as a Holiday Savings Club, is pretty straightforward. Companies help their employees to save for the significant expenses which fall at the end of the calendar year by automatically deducting deposits from payroll and returning it to employees shortly before the large budget crunch of the holiday season. However, the real benefit of the Christmas Savings Program comes from the double-boost, which comes from tax and interest. Payments into the savings program are deducted pre-tax. At the same time, the cash returned to the employee at the end of the year has interest added, typically paid at competitive market rates. This has turned out to be a desirable feature for families this year, as twenty-year high inflation records erode savings in real-time and push up the cost of living.?

For employers looking to invest in perks and benefits which will attract and retain employees during challenging periods for economic growth, a Christmas Savings Program can be a serious gamechanger. With enrolled typically starting in February or March and the bonus paid out in November, programs of this kind can encourage saving via an opt-out system, where the savings are set aside passively, rather than requiring discipline on behalf of the saver.?

While gym memberships and working from home stipends are consistently ranked in the ‘nice to have’ bracket of corporate generosity, a recent survey found that employees are overwhelmingly drawn to companies that care ‘about the full spectrum of workers’ lives.’? With the rising prices of consumer goods, uncertainty surrounding travel plans, and a general unconfidence around economic prospects, a steady and reliable bonus, paid out during the most expensive time of the year and with market-matching interest attached is a real shot in the arm for job applicants.?

The end-of-the-year payout is a real perk for employees, and it also tackles the challenge of finding a secure and reliable interest-bearing savings account or CD. It is centrally managed, tax-friendly and convenient for the employer. There are also serious benefits from the employer, which are worth considering. Unless they’ve budgeted accurately and conservatively for the Christmas period, an employee may well find themselves in a financially challenging situation come late November or early December. This is particularly true for larger families, single-income households, and individuals in sales-based or bonus-related roles. When confronted with unexpected costs for travel, Covid-19 tests and isolation, Christmas presents, and increasingly expensive food, many Americans will turn to credit cards and other short-term debt to see them through the Christmas season.