Savers should service debt first
More than 12.2 million Brits are losing out by refusing to redirect savings to service debt, new research has found.
The research from AXA Avenue said that many people were “walking into financial disaster” by funding their lifestyle on credit rather than redirecting their savings to pay for their outgoings.
It claimed this was because debt servicing cost people five times the money they earned on savings.
It argued that people were under pressure to fund their “buy-now-pay-later” habits on “cheap credit”, at the same time as feeling compelled to save in case of emergency.
On average, for every £1 of interest earned on short term savings, these “saver debtors” are paying around £5 on the interest accrued on their debts, AXA Avenue found.
Commenting on the research, Saran Allott-Davey AXA Avenue’s resident independent financial adviser said, “Those people who are saving money over and above clearing debts are paying unnecessarily high charges instead of redirecting savings for the short-term to be debt free. Our attitudes to debt and saving seem to be at odds with one another; on the one hand we feel compelled to save as it makes us feel more secure, yet we are comfortable with increasing levels of unsecured debt because it is regarded as “the norm”.”