If you have a lot of debt, then you may wonder what the importance of having a savings account would be. After all, if you could afford to save money, then you would be able to pay off that debt, right? Well, that’s not necessarily true. It’s important to have a savings no matter what, as it’s likely that you accrued a considerable portion of your debt due to the fact that you weren’t prepared for a financial emergency when it happened. For example, you may have racked up hundreds of dollars on a credit card fixing your car, and that would not have been necessary had you had a savings account to back you up. Those car repairs will end up costing you much more than they would’ve had you paid cash. Now do you see the importance of a savings, no matter what? Here are some pointers for creating a saving account despite your debt:
Shop around. First off, you must realize that not all savings accounts are created equal. You want your money in savings to work for you while you are not using it. How does that happen? You need to find an interest-bearing savings account with as high a return as possible. Usually, savings accounts offer only minimal interest returns, but it’s possible to find savings account specials that will pay you upwards of five percent interest at least for the first year, as a bonus for signing on. Shop around for your savings account, and find one that pays you.
Cut the credit card. Chances are you have been using your credit as a makeshift savings, meaning credit has been your standby for getting out of financial tight spots. All this method does is get you further and further into debt. Commit to relinquishing this habit – and today.
Prioritize your savings. Once you set up a savings account and stop using credit as a savings substitute, it’s time to begin growing your savings. Work your monthly savings stipend into your budget the same way you would any of your other monthly expenses. Every little bit counts, so every little bit you can contribute to savings needs to go into savings – period.
Once start building your savings and watching it grow with interest, your debt situation doesn’t haven’t have to feel so overwhelming. No one likes to be in debt; however, most people get there the exact same way. Do what you can to reverse your debt habit now by creating a savings habit, and watch your financial well-being take a turn for the better.
About the Author: Tomoko Creveling specializes in personal finance and knows how difficult it can be to let money sit in savings whiel in debt – but it is possible. She also enjoys writing about finance recruitment companies and how they can help HR personnel find new recruits.