Getting into a savings habit is important, but so is making sure that you can manage any high interest debts you have. In purely financial terms, deciding whether to pay off a debt, or to start saving regularly, is clear cut:
If you're paying more interest on your loan or debt than you're earning on your savings, it makes sense to pay off the debt first.
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, mortgages, and certain loans, have fixed repayment terms that are not negotiable. If possible, you should try and build up savings in addition to making those payments.
There are 3 key things to consider:
A blended approach could make sense. Referring to the example above, you might:
HSBC has partnered with Everfi to create a series of modules on a variety of topics, including Savings, Banking, Credit Cards & Interest Rates, Credit Scores, Financing Higher Education, Renting vs. Owning, Taxes and Insurance, Consumer Protection, and Investing, giving you the tools to better manage your financial future. We hope these interactive digital modules can support your choices.
Additionally, HSBC has created the YourMoneyCounts financial wellness program which is presented by HSBC staff to the community in a classroom setting. Participant workbooks covering Budgeting, Credit, and Identity Theft and a budgeting worksheet are found through the YourMoneyCount link above. This program was created in partnership with the national nonprofit Greenpath Financial Wellness, and they provide free individualized support focused on your personal situation and financial wellness.