Should I save or pay off debt?
If you feel like debt is weighing you down, but you want to build up some savings, too, you’re not alone. Our quarterly Consumer Pulse shows that, despite challenges to household budgets, some people have been able to save more in their emergency funds (savings they’re stashing away for a rainy day). But at the same time, others had to dip into savings to pay their bills. Because everyone’s finances are different, when it comes to managing your savings and debt, there’s no universal strategy that works best for everyone.
The interest rate for your savings account will likely be lower than those of your credit accounts, whether it’s a personal loan, credit card or other type of loan. So, the money in your savings account will earn less than your debt will cost you. When it comes to what’s best from a dollars and cents perspective, using extra cash to pay down debt is smart.
However, the approach you take will depend on the type of debt you have. That’s why it’s important to approach your strategy based on your own situation.
If you have debt and are motivated to build a savings account at the same time, a balanced approach can work. Below are things to keep in mind as you make your plan.
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