Create your own layaway plan for holiday shopping and avoid fees

In another month or two, millions of people will start setting up layaway plans for holiday gifts.

For most of those people, a far better plan would be to start saving now, in a way that lets them keep control of their money and avoid layaway fees.

Remember “Christmas Club” bank accounts? They still exist, and they are a good alternative to layaway plans. It’s a bit late to open one of those this year, because the idea is to save small amounts throughout the year and then have the money available to spend around October.

But that doesn’t mean it’s too late to create a holiday shopping budget and start saving a little each week to avoid gift-related debt and fees. Ideally, the gift budget should match the money set aside to buy gifts.

How much to spend on gifts is a personal decision involving traditions and relationships with friends and family members. Ideally, gift-giving also should be a joyful thing and not one that results in financial strain or new debt.

I’ve written in the past about layaway plans and why I don’t like them, but here’s a brief recap.

In a layaway plan, people agree in advance to buy particular items from a particular store at an agreed-upon price. Then, layaway customers pay in installments until they cover the price of the items, at which time they receive them.

It’s sort of like buying something with a no-interest or low-interest loan, except that you don’t get the thing you’re buying until after you’ve made all the loan payments.

That type of arrangement can make it hard to take advantage of sale prices that may become available, and many stores charge fees to set up layaway plans, as well as fees to cancel them. So, in many cases, using layaway means paying more than people who don’t use layaway, for the same stuff.

Instead of making payments to a store, why not make them to yourself?

Save some money every week, or every month, and when the time comes to go shopping, the amount you’ve saved is your budget. (Or, decide what your budget will be, and then save the amount needed).

I realize that layaway is attractive for people who have trouble saving. When all your savings are in one place, and money is tight, it’s awfully hard to keep some money set aside for gifts.

So, the trick seems to be to put some money somewhere else.

It’s mostly a psychological trick, because even with a layaway plan you can get your money back. It’s about making the money less available and out of sight, which is the idea behind having a separate account like a “Christmas Club” at a bank or credit union.

So, here are some suggestions:

Get a prepaid debit card that you can add money to, and later use for purchases. This could be a good option, but don’t get a card with fees. The top-rated Bluebird card from American Express and Walmart combines debit card features with bank- like features such as direct deposit, and you can add money to the card at any Walmart.

You could open another federally insured bank account. Why do that? I know of no better way to safely store money, and a separate bank account can be useful for funds you don’t want to co-mingle with your regular savings and checking accounts. Plus, some banks will give you money for opening an account (shop around).

Buy gift cards for the stores where you plan to shop. Most grocery and drug stores sell gift cards now, so it would be easy to buy a gift card when you do your weekly shopping.

Do it the old-school way. Set aside some money in a jar, or a shoebox, or an envelope. In the Charleston area, it’s a good idea to have some cash handy anyway, in case there’s a hurricane. So set some hurricane money aside and you’ll have cash for gifts right around the time hurricane season ends.

If layaway still looks like the best option for you, try to find a layaway plan that has no set-up fees, and no penalties if you change your mind later and want your money back.

It’s not unusual to need tricks or systems that help you save money. The important thing is to get in the saving habit and plan ahead. Christmas comes but once a year, as the saying goes, but like most gift-giving holidays, it comes every year.

Reach David Slade at 937-5552 or Twitter @DSladeNews.

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