Savings Club

  

Categories: Banking

A “savings club” is a type of savings account set up by a group of people, usually for a specific purpose. If this sounds like another term for a joint savings account, it’s not. Well, it kind of is, but savings clubs operate a little differently than a normal savings account.

For one, like we mentioned, they’re usually set up for a specific purpose. And two, they usually come with a lot more rules and regs than standard savings accounts. For example, there might be rules about when deposits are due and who makes them. There might also be rules about when money can be withdrawn, how much can be taken out, and by whom. And three, they often pay a higher interest rate than normal savings accounts (which are paying, what, like .000001% interest right now, so that’s not hard to beat) because of all the restrictions.

The most common type of savings club is probably the Christmas club, but they’re not the only savings club game in town. Let’s say we’ve got four roommates sharing a house in Phoenix, Arizona. Phoenix gets crazy hot in the summer, which means utility bills can easily exceed $500 a month in June, July, and August, when they’ve got the central air running pretty much 24/7. Compare this to the $25 utility bills they usually get in the winter, and we can see where those summer electric bills could cause quite the headache.

Now let’s say our roommates open a savings club account: every month, they each put $30 into the account. The funds can be withdrawn three times a year—once in June, once in July, and once in August—and their whole purpose is to make sure they can afford those pricey summer bills.

Depending on the bank and the type of savings club we’re talking about, the rules—and the availability—of these kinds of accounts can vary quite a bit. So if a savings club sounds like it could be the answer to a problem our squad is facing, it might be worth a Google to see if it’s the right option for us.

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finance a la shmoop what is a savings and loan versus a bank all right

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savings and loan some savings and loans yeah it's a cleverly named you know like [Case of cash appears]

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home loans car loans stuff like that banks issuer of credit cards and big

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lines of credit for small to large business savings and loans the little

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local retail gal banks the big fat cat corporate dude with big appetites and [Woman sitting behind savings and loans desk]

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small fast red convertible cars with a stick-shift

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savings and loans owned either by the lenders and borrowers of the savings and

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loan itself you know kinda like a co-op or it can be set up like you know normal

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ish corporation banks usually owned just by shareholders some are big like this

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guy and that guy yeah and there's a whole bunch of other small fries too

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savings and loans can loan up to 20% of their assets half of that for big [Savings and loans assets pie chart appears]

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business half of that for small business loans at least these days and why did

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delineation well because small business is default a whole lot more than big

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businesses savings and loans are allowed to tap into the very liquid Federal Home

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Loan Bank system Fannie Mae in the gang those guys and in order to do that ie [Man with savings and loans briefcase for head appears]

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get cheaper money in return SNL's have to have at least 65% of their assets

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invested in residential mortgages meaning most of their loans are you know

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small home mortgages a lot of first-time buyers there all right well why is this

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a thing well because the American Dream from a political perspective revolves in [A couple moving into house]

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large part around owning your own home right not a bad idea the government has [Uncle Sam appears and boy walks away with pile of cash]

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gone to a whole lot of effort to make it easy for the little guy to borrow money

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and have his or her own little castle a little to start anyway banks those cold [Boy dancing outside castle]

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cruel concrete walled things don't live under this same structure they don't get

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to tap into the same cash fool reserves that SNL's do is not all the time but

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they get to loan money a more or less wherever they want to loan money there's

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way fewer strictures on banks than SNL's banks exist to make money for the

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shareholders of the bank duh and they're financially Darwinian beasts [Charles Darwin beast appears in misty forest]

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good at lending money that costs them low rates to rent and then they rent it

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out at much higher rates to customers right and they live on that spread so

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banks also get hot and heavy with other kinds of borrowings things like credit [Man and woman sitting in car looking at sunset]

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card issuance like I think about how much money your credit cards charges and

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so on they get a big piece of that and servicing a debt you know and wealth

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and/or financial management services like they take a percent of year or so

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for managing all your dough and to some extent merchants and investment banking

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services as well you know for the big guys who are global so banks think big

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loans big money big spreads wholesale savings and loans think small loans

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small money small spreads retail banks mr. Potter savings and loans [Mr Potter appears]

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George Bailey and the rest of the Bedford Falls gang did you hear that a

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video editor just got his wings [Man grows wings]

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