Lowdown on Christmas savings
Squirreling away money now for later is age-old, but it's become a multimillion-dollar industry as all sorts of companies jump on the Christmas preparation bandwagon.
Some offer bonuses on prepaid money that outstrip deposit interest rates in a deal to lock in your spending during the summer months. Others simply lock up your money to help protect people from themselves.
On the face of it, saving is simple: set up a separate account, transfer money to it, and let it be.
However, discipline slips easily in the depths of winter - or any time for that matter.
Consumer NZ advisor Maggie Edwards, of Wellington, says it's a good time for people to start preparing themselves for the year's end. School holidays, Christmas, trips away and the impending school year converge to create a summer spending maelstrom that catches many families out.
Starting to set money aside early can be difficult - winter heating causes another bill spike - but it means less stress as the advent approaches.
"Anything that takes the pressure off Christmas," Edwards says.
Setting up a savings account and adding money each week is the best way, but not everyone has the discipline to see it through, she says. People should try be as proactive as possible for Christmas, she says, "rather than reacting around late November, early December and panicking".
Some people like to preorder Christmas hampers because they know what they were getting and how much they needed to pay each week to ensure it arrives at Christmas, although many times the hampers are more expensive than if people nipped down to the supermarket themselves, she says.
Also, missed payments have to be made up later and cancellations are usually met with strident haircuts on the money paid in.
Main Kiwi hamper company Chrisco offers televisions, jukeboxes and other electronic sundry as well as the traditional food parcels, which suits some people. Chrisco did not respond to BusinessDay.
Confusingly, Auckland-based Hampsta is not a Christmas hamper company. Rather it's an enforced saving scheme for the typical "gonna" Kiwi, general manager Gary Alway says.
"Ordinary Kiwis, like me: married, two kids; gonna, gonna, gonna, but never do [save]."
Stripped down, you pay a flat $39 annual fee to lock away your money, a bouncer between you and your Christmas stash.
Alway says the $39 is the cost of administering the Public Trust account which holds the cash, making it completely safe if Hampsta were to fail. Alway says keeping the funds in trust is expensive, but important, because his customers could not afford to lose their money.
Members set up regular direct debit payments that can be put on hold for changes in circumstances. It is possible to get deposits released early but there's a $40 administration fee. Come December, the money is loaded on an eftpos card and can be spent at 22 retailers, covering a range from food through to electronics and pharmaceuticals.
Hampsta was set up in 2008 by Auckland-based owners Shane McKillen and Michael Morton, as an alternative to long-running Christmas hamper company Chrisco.
For an insight into how lucrative selling hampers can be, remember that internet mogul, and thorn in the side of the nation's spy service, Kim Dot Com is renting the $30m former home of Chrisco founder Richard Bradley.
An example of how Christmas clubs can quickly turn pearshaped was when rival hamper company Mrs Christmas failed in 2009 when it couldn't pay the courier for the previous year's deliveries. Chrisco took on the 3500 customers and the ongoing business.
Alway says Hampsta runs at a small profit, but it is mostly a feel-good project by Morton and McKillen. The average saved by Hampsta members was $1200 including the $39 charge.
Many people had avoided Christmas saving programmes in the past because of perceived stigma, but that has mostly lifted, Alway says. Instead of thinking of it as something for poor people, it is seen as a helpful way of preparing for the holidays, he says.
Hampsta had grown from 65 mainly Auckland members at launch to more than 20,000 nationwide. That means about $24m is paid into the scheme each year, and out again to the retailers involved. Hampsta makes its money by taking a small percentage from the retailers when the money is spent.
New Zealand Federation of Family Budgeting chief executive Raewyn Fox says Christmas clubs are a great way for families to spread the cost of their holiday groceries throughout the year.
Fox says there's no particular amount of savings people should shoot for, but the best measure was to figure out how much last year cost while looking for ways to cut the spending.
Simply sitting down early in the year to figure out what to buy for whom can prevent panic buying, allow people to make the most of sales before Christmas and avoid the retail stampede of early summer, she says.
The federation sees the supermarkets' Christmas clubs as a good deal, and a soft-handed way of locking up savings.
"With any one of the hampers, no matter how good they seem, you can get the stuff at the supermarket for cheaper."
While winter can be a difficult time to start saving, it has to be done at some point, and sooner is better than too late, she says.
"You can make excuses not to start at any time of the year. Taking a little out of your pay - for the first few times it might be a bit painful - but after that you don't notice it."
Both sides of the large supermarket duopoly are pretty cagey about talking specifics on Christmas clubs, despite both offering essentially the same deal: Pay the money in over the year, and get about 5 per cent on top when you spend it over the summer months.
Foodstuffs group was the most upfront, touting its 145,000 active members nationwide across its three brands New World, Pak n Save and Four Square. The earlier you put in to your Christmas club the more bonus you get, from almost 6.5 per cent if you start contributing a year head, to about 4.5 per cent six months later and 3.4 per cent in spring.
Being a collection of co-operatives, the Foodstuffs group includes a South Island company, one in the lower North Island and another based in Auckland. The Christmas Club funds are held by a subsidiary in an interest-bearing account until it comes time for holiday spending, but Foodstuffs won't say what the average customer accumulates.
With bank deposit interest rates below the offered 5 per cent bonus, it appears likely the spread would have to be topped up some way by Foodstuffs, or it may be that monthly-compounded interest offsets the difference.
But that can't be confirmed as Foodstuffs refuses to clarify, citing commercial sensitivity.
Countdown, on the other hand, refuses to say how many people pay in. It could be that its voucher system means its unclear even to itself how many customers are pre-paying their summer groceries.
Countdown spokeswoman Kate Porter said the vouchers can be used at any time across the country and don't lose their value. If used during December and January they confer a 5 per cent bonus.
"It's just another way we can help our customers save for their Christmas shopping in small bites," she says.
Countdown funds are also kept in an interest-bearing account and the club system has been running for about a decade.
The Warehouse has run a savings club for the past six years, on similar terms as the supermarkets, with a monthly $500-bonus draw for those paying in. Since its inception, 90,000 of the eftpos-style club cards have been issued.
A spokeswoman says the interest earned on money held is minimal but allows the offer of 5 per cent discounts and bonus competitions.
Foodstuffs New Zealand communications manager Katherine Klouwens said Christmas Clubs had been running for about 60 years, with the first versions part of individual stores' service to loyal locals. The modern version, started in 1990 as a voucher system and was updated between 2008 and 2010, to an eftpos system with pin security.
Its main supermarket brands run their clubs so customers join clubs with Pak'n Save, New World or Four Square with the latter only in the South Island. The Pak'n Save card can only be used at Pak'n Save supermarkets throughout the country and not at the other two brands, similarly with a New World card or a Four Square card. The cards allow people to pay into the club online and check their balances and have increased the number of customers getting on board each year, Klouwens says. Despite the varied modern ways to save, it still boils down to preparation and restraint. A little forgone now can prevent a large headache during the holiday season.
BY THE NUMBERS
145,000 club members at Pak'n Save, New World, Four Square
90,000 Warehouse club members
20,000 Hampsta members