I have recently applied for my very first savings account. Yes, you heard me right. I never had a savings account until one week ago. I mean, don’t get me wrong, I used to put some money aside if I wanted to spend it on something specific, but I never felt the need to open a separate account for this purpose. I am ashamed to admit that I was never a good saver. I would only save for a couple of months if I desperately wanted to buy something, and then once I saved up the required amount I would spend it and consequently stop saving. Saving for the sake of saving was not my thing. My relationship with money was based on the principle “earn money to spend money”. So I did just that, I spent. Well… these days are gone and I now have a new principle “spend no more”!
ORGANISING MY MONEY
I have recently come to realise that if I want to be more organised when it comes to my finances, I need to separate my savings (no matter how small) from the money I can spend. I currently have one main bank account where I get my salary paid into and where I pay my bills from. I use what is left as I please (not that I have much left after all bills are paid). I no longer think that this is where my savings should sit too. This is why I opened a simple Cash ISA (1% APR per tax year) that I am able to access online and make one-click payments between my main and my saving accounts. Interest is paid monthly and there are no withdrawal penalties if I decide to use the cash.
SHOULD I OPEN A SAVINGS ACCOUNT?
Now, having said all this, I do not believe that one should save if one has debt to pay off. I do not think this is a good idea to be sitting on a significant amount of cash if you have to worry about making debt repayments that often involve associated interest payments. This simply does not make sense to me. Yes, you are saving, but at the very same time you are losing more in interest charges. This is one of the reasons I was not in a hurry to open a savings account as my main priority is debt repayment. That said, I am now getting some small side income that is not included in my monthly budget and is “extra”, so to speak. I have decided that for the time being, I will be setting it aside rather than throwing it towards my debt (once there is enough saved, I can use my savings to put towards my debt anyway).
WHY I DECIDED TO OPEN A SAVINGS ACCOUNT
There are three main reasons for my decision to have a savings account. Firstly, I am currently on track with my debt repayment and can afford to tuck some cash away. Secondly, I like the idea of having a small cushion to rely on should I need to. Thirdly, I need to save some cash to pay for my trip to South America and having this money in my main bank account is just not a good idea. I will not be saving big at this moment in time. This is just a little something that will hopefully make me worry a little less about money and all my “what ifs”. I am sure I will also enjoy seeing my money grow and this will, no doubt, be a huge motivation for me to do better.
What is your relationship with saving money like? Are you a good saver?