When deciding whether to save or repay, look at how much interest you'll be charged on the debt, versus how much interest you'll earn through saving.
For example, if you have savings in an account earning 2% interest, and you have store card debt that you're paying 19% interest on, it may be sensible to pay off the store card debt first, before putting money into the savings account.
However, this isn’t a rule that applies to every situation.
For example, some loans have fixed repayment terms that are not negotiable, and some forms of lending, such as a mortgage, are for the longer term. If possible, you should try and build up savings in addition to making those payments.
There are 3 key things to consider:
Interest rate – If you have high interest debt, such as payday loans and store cards, these should usually be your number one priority. If you have several debts, you may want to look at prioritising the ones charging the highest interest rates first.
Unexpected costs – It may be sensible to build up an emergency savings fund, to cover unexpected costs.
Early repayments and break fees – Certain loans and borrowing come with penalties or fees if you pay them back early. You should check the terms of any borrowing carefully before opting for an early repayment.
If you feel like you're struggling with debt, and have missed any repayment or are worried you might miss a repayment, there are ways you can get help.
If you're an HSBC customer, you can contact us for support.
Whether it’s for something big, like a house deposit, or simply for your peace of mind, having a specific goal to save towards can help you stay focused.
So why not set some savings goals? Ask yourself:
Once you've turned your answers into a savings plan, you’ll need to stay focused.
| Write your goals down | Place them somewhere visible like the fridge door, record them in a savings app, or make a note in your phone.
The idea is to make sure you see them often so you're reminded of them regularly. |
|---|---|
| Break big savings goals down | Break down big savings goals, into a series of smaller targets. Big goals can seem daunting, and when you don’t seem to be getting much closer to them it can be tempting to give up.
Breaking them down into smaller goals will make it easier to see the progress you're making and keep you motivated. |
| Get friends or family involved | Share your savings goal with them and ask them to check up on your progress on a regular basis.
Sharing goals can make you feel more accountable for them, and encourage you to keep going. |
| Think about timescales | It can be helpful to think about your savings goals in terms of short term (like a holiday or a new car), medium term (like a house deposit) and long term goals (like pay off your mortgage or save towards a retirement fund).
By separating out your goals in this way, you can enjoy the gratification of reaching short term goals, while still having plans in place to reach your longer term goals. |
| Write your goals down | Break big savings goals down | Break big savings goals down |
|---|---|---|
Place them somewhere visible like the fridge door, record them in a savings app, or make a note in your phone.
The idea is to make sure you see them often so you're reminded of them regularly. |
Break down big savings goals, into a series of smaller targets. Big goals can seem daunting, and when you don’t seem to be getting much closer to them it can be tempting to give up.
Breaking them down into smaller goals will make it easier to see the progress you're making and keep you motivated. |
Break down big savings goals, into a series of smaller targets. Big goals can seem daunting, and when you don’t seem to be getting much closer to them it can be tempting to give up.
Breaking them down into smaller goals will make it easier to see the progress you're making and keep you motivated. |
| Write your goals down | Get friends or family involved | Get friends or family involved |
Place them somewhere visible like the fridge door, record them in a savings app, or make a note in your phone.
The idea is to make sure you see them often so you're reminded of them regularly. |
Share your savings goal with them and ask them to check up on your progress on a regular basis.
Sharing goals can make you feel more accountable for them, and encourage you to keep going. |
Share your savings goal with them and ask them to check up on your progress on a regular basis.
Sharing goals can make you feel more accountable for them, and encourage you to keep going. |
| Write your goals down | Think about timescales | Think about timescales |
Place them somewhere visible like the fridge door, record them in a savings app, or make a note in your phone.
The idea is to make sure you see them often so you're reminded of them regularly. |
It can be helpful to think about your savings goals in terms of short term (like a holiday or a new car), medium term (like a house deposit) and long term goals (like pay off your mortgage or save towards a retirement fund).
By separating out your goals in this way, you can enjoy the gratification of reaching short term goals, while still having plans in place to reach your longer term goals. |
It can be helpful to think about your savings goals in terms of short term (like a holiday or a new car), medium term (like a house deposit) and long term goals (like pay off your mortgage or save towards a retirement fund).
By separating out your goals in this way, you can enjoy the gratification of reaching short term goals, while still having plans in place to reach your longer term goals. |
In order to meet the savings goals you've set, it’s a good idea to establish where you're starting from, and how much you can afford to save.
Creating a budget can help you:
If your expenses come to less than your take home pay, you have a surplus. You could use this to prioritise paying off any debts you may have, or put it into savings or investments.
If your expenses come to more than your take home pay, you should focus on reducing this, before you focus on building up any savings.
If your expenses are higher than your income, you might want to look at ways to reduce your spending. Could you:
There's no specific amount of money you should save each month and your budget will help determine what you can afford to put aside.
Some people find it helpful to follow saving strategies such as the 50-30-20 model. This is where you aim to spend no more than 50% of your income on the things you need, 30% on the things you want, and 20% on building up savings or repaying debts.
