The Benefits of a Christmas Savings Program
As America emerges from the twin challenges of an era-defining global pandemic followed by an unprecedented supply chain crisis, it has quickly become apparent that a third economic setback is unfolding: the employment crisis. Businesses across the country are reporting severe challenges in filling open positions at every level, with every sector, industry, and business size seemingly affected, from small family-run regional firms to international conglomerates.
As hiring staff starts to take up increasingly more of a corporation’s time, resources, and staffing, several proactive and innovative companies are turning to novel and established perks and benefits as a way of trying to attract talent to their payrolls. As well as generous maternity and paternity leave packages, 401(k) programs with hefty contributions from employers, and market-leading health insurance packages, many companies are looking to a long-established corporate perk that has recently become dormant: the Christmas Savings Program.
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.
Avoiding Short Term Debt and Predatory Lending
This year alone, it has been estimated that the average holiday shopper will spend an additional $998 above and beyond their usual expenditure. While this all very well if it is part of a reasonable and steady budget, for most Americans, this level of spending will require them to go into credit card debt. With many consumers paying the minimum of $25 a month on credit card debt, the reality is that a $998 Christmas bill will end up costing them substantially more over the year, with interest rates causing severe problems.
An indebted employee is an inefficient employee. When a worker is stressed about how they’ll pay for Christmas, you’ll quickly see their productivity drop, along with the atmosphere in the workplace. A Christmas Savings Plan is a pragmatic and equitable way to avoid employees struggling with Christmas finances, giving them peace of mind and focus.
A Dynamic Savings Product with Flexibility Built-in
The first Christmas savings club was launched by Merkel Landis of the Carlisle Trust Company in 1909. Landis set up a basic scheme for around three hundred and fifty employees, who contributed an average of $28 each. The schemes grew in popularity until the 1970s when their popularity dropped.
Although they have a long history, the Christmas savings program scheme is, in fact, a flexible and dynamic product. Unlike some direct-to-consumer alternatives banks offer, employer-administered savings clubs can be ‘rolled over’ if an employee doesn’t spend some or all of the savings they’ve amassed. Many savers use the scheme to allow their savings to grow with high-interest rates, tax benefits, and opt-out convenience, putting the program to use to reach longer-term savings goals like house purchases, the holiday of a lifetime, or help out younger generations.
A Practical Alternative to Raiding Retirement Funds
Download: The Benefits of a Christmas Savings Program
Another benefit of a Christmas savings program that many employers overlook is its help in preventing employees from dipping into retirement funds. When it comes to meeting unexpected costs at short notice, accessing retirement savings or pension funds during your working years is a serious financial misstep which you should avoid at all costs. Research shows that since the start of the pandemic, more and more American workers have been forced to ‘borrow’ from the cash set aside for their post-working years. As well as incurring a hefty tax benefit, depleting the savings cushion for old age, and liquidating investments at what is probably an inopportune time for long-term growth, dipping into your retirement funds is likely to cause real administrative headaches for your employer.
Although it is generally possible to access retirement savings pre-retirement, this is not something that these products are designed for. There is also strenuous paperwork and inconvenience in doing so, which your companies HR, payroll, or finance department will shoulder. A well-designed and administrated system will provide a much more time and cost-efficient emergency support pot for workers, avoiding the problems that arise from having to access the cash in them at short notice.
Avoid Stress, Increase Morale
Indeed, a savings program works well across the board to create an emergency cash war chest. Extensive studies during recent years have repeatedly demonstrated that the majority of American households have insufficient savings to meet unexpected everyday expenses like health issues, motor vehicle problems, short-term unemployment, and home maintenance. In 2020 the AARP found that “households that achieved liquid savings of just $2,452 at any point are significantly less likely to experience extreme financial hardship up to three years later.” Building up a savings pot via a Christmas savings club scheme is one of the easiest ways to avoid severe stress and financial challenges.
As an employer, setting up a scheme for the holidays is an easy way for you to guarantee the long-term financial health of your employees. As well as the obvious moral benefits, it is also a great way to boost workplace morale, worker efficiency, and productivity. An employee caught in short-term financial struggles will likely need to leave work early to meet childcare obligations, face difficulties getting into work due to transport problems, struggle to remain focused during critical tasks, and be overworked from additional work or side-hustles that they’ve been obliged to take on. In comparison, an employee who could meet an unexpected cost by accessing their holiday savings scheme will be appreciative, less stressed, and generally relieved. A Christmas savings club can be a surefire way to protect workers from financial stress for employers looking to recruit and retain a cheerful, productive, and focused workforce.
Promoting Financial Literacy in the Workplace
An oft-overlooked upside of establishing a Christmas savings club in the workplace is the benefits of financial literacy culture. Having a scheme in your place of work that is dedicated to putting aside savings can create a natural support network. Saving money isn’t easy, and like anything which requires long-term dedication and commitment as well as the sacrifice of short-term comfort for long-term goals, you’re much more likely to be successful if you approach it as part of a team rather than going it alone. Employees who have benefitted from such a scheme report a sense of camaraderie and community. There is a joint celebration at meeting targets, a shared sense of purpose, and a feeling of pride in the collective achievement. Christmas savers are committed to reaching their savings goals to have a great Christmas, so it’s easy to root for your colleagues.