When saving money isn't a good idea

Friday, 20/02/2015

It’s generally accepted wisdom that saving money is a good thing. When you dutifully stash away a few quid in your savings account each month, those saved pennies are viewed as valuable insurance against future financial insecurity. Unfortunately, saving isn’t always a great idea; read on to discover why sometimes it’s better to use your money differently rather than keep it sitting in your savings account.

Get rid of debt first

Almost all debt costs money until it’s cleared, including the mortgage. Clearing any debt you might have as quickly as possible is the best use of any spare cash you have. The interest rates on loans are almost invariably higher than the rates on savings accounts, so always get any outstanding borrowing cleared first before considering savings options in order to improve your overall financial situation.

Low interest rates make for gloomy savings returns

In some cases the interest rates on savings accounts are currently below the rate of inflation, meaning that over time your savings will buy you less, rather than appreciating in value. If you’ve got some spare income and want maximum return on it, investment rather than money saving might be a better choice; a suitably qualified financial advisor should be able to suggest suitable alternatives to consider.

Buy to save

There are many items that, whilst they cost more than their competitors, represent greater value in the medium term due to superior quality, reduced energy consumption or reduced maintenance requirements. If you’ve considering a new purchase, look for options that will provide maximum durability and lowest on-going costs. Paying slightly more now for a superior product will yield greater money saving results over time than opting for the “cheap ‘n’ cheerful” product that subsequently requires significant repairs or maintenance.

Although taking care of your money is always sensible, saving it is not always the best option. Look at your own individual circumstances and devise a financial plan that ensures you make best use of your available cash, to achieve better long term fiscal well-being. This will maximise your chances of securing a financially healthy future.

Payday loans are not suitable for, and would be expensive as, a means of longer term borrowing and are not appropriate if you are in financial difficulty.

Representative 1269.7% APR

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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk