Is it Better to Spend or Save When Interest Rates are Low?
Interest rates have been low for a very long time and it can be difficult to know what to do with your spare money when this is the case. Putting them in a savings account only attracts very little interest and you may feel like you would rather just spend the money than bother to hold onto it as you get so little reward for doing so.
Having some money in savings is something which people like to do to give them peace of mind. They feel that they would like some money to fall back on and to help them out should they have an emergency. However, it can be frustrating when you make a lot of effort to save money and then find that you are not getting very much in the way of interest for that money that you have. Some people feel that they are better off spending it because the rate of inflation is higher than the interest they are getting on it so they are actually losing value in the money by saving it.
It can be a difficult decision to make. Those people that are used to using credit cards or other types of lending such as quick loans may not be so worried about keeping some emergency money. They may feel that they can use a card or overdraft to keep them going should they need some extra money and therefore there is no need for them to have to panic about having some savings behind them. This is obviously a very personal thing and will be determined by how much risk you are happy to take as well as whether you like the idea of saving or the idea of borrowing.
When you are making the decision to spend money rather than save it is important to think about what you are buying. Do not just buy random things because you would rather spend. Think about the items that you are buying and whether you really need them. Putting your money into things that you do not really want or need is not a good way to be. You may end up finding that you have so many things that you do not have room to store it all. You may find that you end up regretting buying those things that you did not really want. This does not necessarily mean that you should not buy anything, just that you should make sure that you think hard about what you are buying.
Many people would say that it was better to build up some savings if you can but if you are unhappy with the interest rate then it is not surprising that you feel that perhaps you should just give up saving and spend money. However, it is worth thinking about whether you can get a better return on your money. There may be savings accounts that you can use which give you more, particularly if you are prepared to tie your money up for a year or more or if you are happy to give notice before you withdraw it. You could even take some risks and invest it if you want to. This would mean that you could risk losing the money but you could end up making significantly more return on it compared to a savings account so could be a better option that just spending it on things that you do not need.
So there is not only one alternative to saving money, meaning that you do not have to spend the money to make the most of it. If you are not happy with the savings rate that you are getting then do some research and find out if there are any better options for you. You may be happy to tie up your money or take some risks to try to get better interest. If you are not sure where to invest then you can either do some research yourself or talk to a financial advisor who will explain all of the options to you and let you know which they think will be the best for you depending on how much you can afford to invest and how much risk you are prepared to take.