We’re constantly told to save, save, SAVE! Have an emergency fund, a rainy day fund, a college fund. But we’ve also been told to get rid of debt… To pay it all off… Don’t charge ANYTHING. Where’s the happy medium? Should I really have six month’s income in a savings account when I owe thousands in student loans? Yes and no.
There are a few things to consider when looking at your savings account versus your debts. I read a finance article a few months ago that made me sit down and take a hard look at my finances. Here are some things to consider:
- Think about the interest rates. Why are you saving thousands in a bank account that’s earning maybe 1% and paying interest on a loan or credit card that’s over 10% APR? You’re losing money faster than you’re making it!
- Consider debt consolidation. But beware of businesses who charge you to transfer balances. There are plenty of places (credit unions, for example) who will let you transfer balances for FREE and at extremely competitive rates.
- Stay in the safe zone. I’m not recommending you completely cash out your savings account to pay off your student loans. Keep what you need… and then some. A nice little cushion for peace of mind.
The bottom line is that you shouldn’t be paying interest at a higher rate than you’re earning it – especially if you have the money to pay off your debt. If you need help looking at your finances or consolidating debt, visit your local credit union today!
This blog was written by FTWCCU Digital Commerce Assistant, Sammie Arriola.