If you are in debt, don’t save and pay off early

Even if you only owe a small amount, saving money or having money in a Saving Account whilst in debt normally makes no sense. Let’s do the numbers If your loan of £5,000 is being repaid at an interest rate of 10% you’ll be paying £500 per year in interest. A Saving Account pays less than loan interest and may be around 5% and therefore may you £250, plus you may also have to pay TAX on those savings. The results. You’re £250 down. If you use the £5,000 you have saved to pay off the debt, at the end of the year you have paid nothing and saved nothing. This makes you £250 better off. Debts first, save later So if you do owe the Credit Card company, Bank, pay them off as soon as you can before you think about saving. It may even make sense to pay off the Mortgage before squirreling away. Do you have money saved and debts? What reasons have you got for keeping the saving accounts open?