Let’s say you need to make a purchase. You have two options. Option one is that you take out credit to pay for it and option two is that you use your savings. In the former case, you will need to pay interest on the money you borrow but in the latter case, you may have received interest on the money, at the very least you will not have been charged interest on it, at most you may have paid a fee for a “premium” current account. Financially, therefore, it typically makes sense to use savings instead of credit whenever you reasonably can. This, however, means building up the savings in the first place and that is not necessarily easy. For some people, it may genuinely be impossible, but hopefully for most, it is possible with a bit of motivation. If you think otherwise, here are some savings myths busted.
It’s too early/late in life for me to save
The earlier you start, the earlier you can potentially reach your savings goals. The later you start the more of an effort you may have to make to reach your savings goals and you may even have to curtail them slightly, but at least you can try, which has to be better than not trying at all.
Now isn’t the right time for me to save
To be fair, this one may not be a total myth for everyone, if your finances are really stretched tight, you may genuinely not be able to save any money, but it’s a statement which can also be easily used as an excuse which doesn’t stand up to close scrutiny. If you can reduce the cost of anything you do, you can save. That can be something as simple as switching from a name-brand product you’re in the habit of buying to a supermarket own-brand equivalent, doing more of your shopping at a discount store such as ALDI or LIDL or looking for every possible opportunity to use discount codes. It may not seem like much, but you’re still saving.
I can’t save enough to make it worthwhile
So, what’s your alternative? Even if you have good reason to believe that you have no realistic possibility of meeting your ideal savings goals, surely, it’s better to have some savings than to have none at all? Once you get started saving and start to see how those small, individual contributions can add up over time then you may be considerably more motivated to keep adding to them.
If I focus on saving now, I’ll miss out on life
Saving is about prioritising. Nobody’s saying you should turn down a fabulous opportunity just so that you can save the money you would have spent on it. You could, however, at least consider turning down opportunities which you would class as “good but not great” in order to save some cash. Remember, while cash savings can come in handy for many practical purposes, they can also be put towards your life goals and that far from making you miss out on opportunities, your cash savings may make it possible for you to enjoy experiences you would otherwise have had to miss.
Interest rates are too low to make it worth saving
Interest rates may be low for savers, but they aren’t necessarily all that low for borrowers, so, while cash savings may not earn much interest themselves, they can earn their keep by stopping you from needing to borrow money. Also, you may be able to make your cash savings work a bit harder for you by keeping them inside an ISA, so you minimise your tax liability.
Tax treatment varies according to individual circumstances and is subject to change.