Halloween is this week: according to my calendar, that means it’s time to start booking tickets home for Thanksgiving, planning my Christmas shopping and generally getting ready for the holidays. It also, unfortunately, means that the time of year when I spend the most money is just starting. I have cards to mail, presents to buy — even dinners to plan. And with the way the economy is looking these days, I’m just not sure how far my holiday dollars are going to stretch.

I know plenty of people are thinking about cutting back on Christmas this year. It’s not anyone’s favorite way to save money, but it is effective. The other options for reducing the impact that the holiday season has on your finances tend to involve saving up throughout the year: Christmas Clubs and other specialized savings accounts are meant to spread out the cost of presents and such throughout the year. Personally, though, I don’t think that such specialized savings account really provide that much benefit. In general, the way that a Christmas Club account works is simple: a certain amount of money is moved from your bank account every week — often around $25. Around Nov. 1, your bank cuts you a check for the amount that has accumulated through the year, and perhaps a small amount of interest. It’s that small amount of interest that bothers me — most banks offering Christmas Club accounts offer minimal returns on that dough that you’re saving up for the holidays.

You’d be better up saving on your own in most cases: putting the money in a higher yielding savings accounts or buying CDs. I’d rather a CD personally — the useful factor of a Christmas Club account depends on getting money out of your account and making it harder to spend. It’s out of sight and out of mind until you actually need it. The tough part about using a CD is the length of time you’re planning to hold it for and the initial balance: many banks require at least $1,000 for a CD, with a minimum term of one month. The interest rates get significantly better the longer you plan to hold a CD. It’s possible to find a combination of terms that work for you, but putting together $1,000 can be problematic.

The option of setting up an automatic withdrawal that mimics a Christmas Club account is also an option. You’ll have to put the money into a normal savings account. That’s not necessarily a problem: I prefer to just have my holiday savings out of reach, but that’s a personal preference. If you’re comfortable keeping that money in your savings account, go for it — it will certainly simplify matters. No matter whether you go with your own savings account or with a CD, you’ll still be getting a better return on your money than the terms of most banks’ Christmas Clubs offer — and you’re still making the holidays easier to pay with in the long run. You can even avoid some credit card debt this way, and that’s never a bad thing.

Popularity: 13% [?]

Certificates of Deposit, or CDs as they are more commonly known, have long been the go-to savings product that people depended on to grow their cash reserves. With a guaranteed rate of return, CDs are considered one of the safest and most stable financial vehicles out there. But with interest rates so low, are they still a viable option?

CDs are essentially how banks are able to make money. When you deposit your money in a banks Certificate of Deposit, you are essentially loaning the bank your cash. The bank then takes this cash and uses it to make loans to other customers in the form of mortgages, auto, and personal loans. When those loan customers make payments, a certain amount of the interest (profit) the bank makes goes back to you, the CD customer. This is the interest you gain on your money during your CD term.

Pros and Cons

One thing that differentiates a CD from other accounts is the term. CDs are not transaction accounts, therefore once you put your money into a CD account, it’s locked in there for however long the CD is written for. Usually the longer you put your money into a CD, the higher the return interest rate. The point is to basically freeze the funds so the bank can then use them to write out loans. As the bank gets paid back, part of their profit goes to you. The longer you allow the bank to use your funds, the more they’re going to pay you in interest. They want to have as much of your money in their CDs as possible, for as long as possible, so they’re going to give you better rates to keep you interested.

So what’s the problem with this approach? Your money is stuck! If you open a ten year CD at a certain interest rate, and a better one comes out the next week, or even years later, you can’t take your money out and switch (well, you can, for a hefty fee. Usually this fee is more than you would earn by switching to the higher interest rate). You then have to sit and wait until the ten years is up to get your cash. Another thing to keep in mind is emergencies. If you suddenly have a medical expense or car repair, your money is stuck in that CD.

So why invest in CDs at all? They’re guaranteed. You will never lose any of your principle to market changes or botched stock trades. You will always walk away with more money than you started with. The question is, of course, how much more. Shopping for rates can be a tedious and frustrating experience, particularly if you’re investing in shorter term CDs. You might spend forever going from bank to bank to find the best rate of return, only to have to do it all over again in a year or two when it matures. However, if you’re saving for your kid’s college fund or your retirement, it would make sense to include several CDs in your portfolio. Even if more risky investments, like stocks don’t work out and lose you money, you’ll always have a safety net in the form of your CD. Another little perk is the fact that it stops you from those impulse buys. If you want that brand new plasma TV and have easy access to junior’s college fund, you might be tempted. CDs are not only secure in terms of return, but they also save you from your worst enemy: yourself.

Popularity: 15% [?]