Saving and Borrowing
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Saving and Borrowing
9. Weigh up any savings you may have against your debts. For those who have a degree of savings but borrowing as well, it may be an idea to review the performance of each in order to help your money work as effectively for you as possible. It is common knowledge that debtor interest charged is usually far higher than interest received on a credit balance, not to mention that credit interest is, in most cases, subject to income tax.
However, many people are loath to part with hard earned savings and prefer to make monthly payments to debts from salary, preferring to keep their savings for the proverbial rainy day. There is nothing wrong with this preference, especially if debt far outweighs savings, that it is borrowed in a low interest product, or that they are not struggling to make monthly payments. However, financial sense dictates that savings should be placed directly into some form of borrowing, especially flexible high interest products such as credit cards.
It can be argued that there is little point in paying large amounts of interest on a credit card balance, when savings may be sunk into the balance, saving on this interest, and then retrieved at will, as and when required. This may prove different regarding the payment of loans, as they are often less flexible. However, some flexible mortgage products are now offering the chance to sink savings directly into the mortgage, and retrieve them when needed.
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