Debt problems ‘hold back saving’

Many consumers will be all too aware that debt is not a temporary problem.

Apart from the fact that it may take a long time to find the cash to pay…

Many consumers will be all too aware that debt is not a temporary problem.

Apart from the fact that it may take a long time to find the cash to pay off a debt, this same money cannot be used for other things, a principle economists call opportunity cost.

One of the ways in which the money could be used otherwise is for building up savings, with this helping people prepare themselves for emergencies like the sudden need to repair or replace a car or important home appliances, as well as building up a nest egg for retirement.

Discussing the difficulty indebted people have in putting away savings, spokesman for Moneynet.co.uk Andrew Hagger said: "Unfortunately, when it comes to financial matters, I guess there are some people who don't see any way of escaping their current level of indebtedness and are struggling, so therefore don't even consider the benefits of saving for the future."

Mr Hagger suggested better financial education in schools could encourage people to save more.

One reason many people might focus on paying off debt rather than saving at present is the current 0.5 per cent interest rate, which may make it easier to pay off some debts – particularly variable or tracker rate mortgages – while offering poor returns on savings.

But for those who know they need to put some money away for the future, the best move may be to seek debt help to ensure they can get their debt under control and then use a more stabilised financial situation to plan ahead.

Good planning makes for a more practical way to approach handling money than simply worrying about it, as indicated by a survey carried out by NS&I.

Its research has found people who concentrate on planning save £104.39 per month on average, double the amount of those who worry a lot about it.

Posted by Paul Thacker
 

Tell others:

shortlink