The Truth About Christmas Savings Schemes – Are They a Worthy Investment?
With Christmas already closing in, it’s likely that many of you have started prematurely putting aside a little extra money to cover the festive period. Perhaps you’ve already bought one or two things, or perhaps you have firmly established your Christmas plan of attack. There are those reading this, however, who, for a variety of different reasons made these considerations months ago and ended up choosing a much more regulated route: A Christmas savings scheme. Are they actually worth your hard-earned cash, though, or are they just a festive ponzi scheme?
Christmas Savings Schemes
Christmas savings schemes appear on the surface to be a wise and well-thought out move, especially for lower-income families or people who tend to fall a little short around Christmas time. And their adoption is actually surprisingly pragmatic.
After signing up, you agree to pay a certain amount periodically into your account, coming in the form of either monthly or weekly savings deposits. This amount is entirely up to you, and most start at around £2 per month. If you so wish, then, you can choose to have your money returned to you around a month before Christmas in the form of coupons and vouchers, or you can choose to save for special ‘festive’ hampers, delivered to you shortly before Christmas; assuming you have hit the savings target mark. These can range from food, gifts, and even decoration in some cases.
Now, the problem with this format is simple: You forfeit your money under the pretence of having something of equivalent value returned to you. In the case of vouchers, then, this is (in theory) all well and good. For example at Park, if you were to choose the ‘£10 Love2shop ‘ voucher pack, you would deposit £0.22 per week for 45 weeks. This accumulates to a total of £10, giving you a return of 100% of your investment. This is perfectly sensible, and although these are vouchers that are specific to certain retailers, the Love2shop voucher gives you over 20,000 different options to choose from.
The main problem with Christmas savings schemes comes in the form of hampers. These variously packed boxes can come with everything you need to complete your Christmas, and the small weekly deposit give off an initial money-saving allure. Once you break them down, though, and you investigate exactly what you are receiving for your x amount per week, the waste becomes glaringly obvious.
Let’s take another look at Park. This time, I’ve chosen the Drinks Galore hamper from there Pick n mix Hampers range in order to make my point.
Here’s the contents of this hamper, as displayed on their web-page:
|7 Up, Lemon & Lime||4 x 330ml|
|Coca Cola, Coke||1.5 litre|
|Fiddes Payne, Pink & White Mini Marshmallows||150g|
|Nescafe, Instant Coffee||100g|
|Nesquik, Chocolate Milkshake Mix||300g|
|Nestle, Cappuccino||pack of 10|
|Options, Instant Belgian Chocolate||220g|
|Princes, Pure Orange Juice||1ltr|
|Yorkshire, Teabags||pack of 40|
OK, so I think we’ll all agree that above we have a decent selection. A little arbitrary, perhaps, but decent. The total cost of this hamper comes in at £30.75, paid through 45 weekly instalments of £0.68. Again, this doesn’t seem all that unreasonable, and you should remember that this hamper comes neatly prepacked and is delivered to your door.
Now, let’s see what the above would cost if you were to pick up this hamper’s contents at a Tesco supermarket:
|7 Up, Lemon & Lime||4 x 330ml||£2.39|
|Coca Cola, Coke||1.5 litre||£1.89|
|Fiddes Payne, Pink & White Mini Marshmallows||150g||£1.65|
|Nescafe, Instant Coffee||100g||£2.75|
|Nesquik, Chocolate Milkshake Mix||300g||£1.99|
|Nestle, Cappuccino||pack of 10||£1.50|
|Options, Instant Belgian Chocolate||220g||£3.49|
|Princes, Pure Orange Juice||1ltr||£1.59|
|Yorkshire, Teabags||pack of 40||£1.29|
The total cost of the above comes to £23.11, over £7 cheaper than when purchasing through Park. That is a hike in price of over 20% of the RRP, and that’s before considering that these hampers can only be purchased in packs of 3 or 6. Even with the advertised saving of £9 when purchasing 6, then, you barely get one box at regular retail price.
Financial Services Authority
Another problem with these sort of schemes is that they are not regulated by the financial services authority. Where you have to deposit your money in a bank account or through a regulated building society, you would be afforded secure protection that you just do not get through firms like Park. If the particular firm you decided to save with was to suddenly go bankrupt, you are guaranteed absolutely no protection; you would never see your money again. Also, in the case that you need immediate access to that money, regardless of the reason, they are under no obligation to give you access and/or return the amount to you. If you’ve already been stung by a Christmas savings scheme, then, and the firm are refusing to return your investment, we recommend you consult a team of professional and experienced solicitors at Coles.
The final disadvantage to choosing a Christmas savings scheme over a more secure savings account is that you do not see any interest on the money you have invested. In this sense, you are basically wasting a certain percentage of your savings each month – money you don’t have to lose when saving in a bank or building society.
Fundamentally, Christmas savings schemes can occasionally be beneficial, but only when used in a particular way. There’s no such thing as a free meal, and the opportunity to save a bit of cash for Christmas can end up costing you quite a lot more in the long run.