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Rekenthaler Report

Christmas Clubs and Private Equity Returns

Freedom is just another word for an emotion left to lose.

Enforced Savings
Back in the day, points out economist Richard Thaler, there were Christmas Clubs. Before credit cards were widespread, how to be certain that money would be available to buy Christmas presents? Join a Christmas Club! Send the Club weekly checks, and in return it will send that money back, sans interest, when the holiday season arrives. Problem solved.

On the surface, Christmas Clubs were bad choices. The Club extracted the time value of money, leaving the saver with nothing more than what he put into the scheme. He could have fared just as well by stuffing those bills (or coins) underneath his mattress, or earned interest in a bank savings account.