To Save or to Pay Off Debt? Answering This Thorny Question

Written by Karen Bryan

Numbers And FinanceOn payday, do you struggle to decide between paying down consumer debt, mortgage and student loans and socking as much cash as possible into a high interest savings account? You’re not alone.

Millions of people across the UK are in this same confusing situation, and most are completely unsure about the best choice for their future. Unless you are a financial expert, the conflicting advice from family, friends and pseudo authoritative sources online can all seem baffling and overwhelming, but at the end of the month all can agree that both strategies have their positives and negatives.

Here are some important things to consider when deciding where to allocate your money.

Pay Attention to Your Interest Rates

You should always be mindful of the different interest rates on credit cards – paying off a card that carries a 17% interest rate is the equivalent to receiving a 17% return on your savings – this is a huge return, particularly when you realise that the stock exchange only has an average long haul return of 8%! Your debt is costing you money – it pays in more ways that one to rid yourself of high interest credit cards.

Emergency Funds are Vital

Do you have enough – or any – money set aside for a devastating health problem, an unexpected job loss or a costly home improvement? This is a key part of anyone’s financial fitness – without an account containing at least 3 months worth of living expenses you are living precariously and putting your family at risk. Consider how much you can comfortably put aside a month into this emergency fund while still paying your debt down diligently.

Not All Debt is Created Equal

Should you be paying more onto your student loans or on your credit cards? Which credit cards should you focus on paying first? The answer to both of these common questions is simple – start by paying down the card that has the highest interest rate, and pay it with disproportionately high payments until it is back down to zero. Repeat this process with the next highest, until you are left working on the larger, lower interest accounts.

Plan for Retirement

While some people are focused on paying down debt, they neglect to create the most important savings plan a person can hold – a retirement account. Retirement savings planning can be daunting, but with each passing year your attention to this matter becomes increasingly urgent. Comparing retirement savings options and setting up a comprehensive plan are things that all financially saving individuals should attend to – before it is too late.


While there is no cut and dry answer to the question on whether to save or to pay off debt, the considerations listed above are a solid starting point for your own financial plan. Experts can agree on one thing – whether you are working to accrue savings or you are paying down your debt you are certainly better off than if you spend all of your money at the pub! With a dedicated strategy and time, you will have a savings account, less debt and a brighter future.

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