Rid yourself of debt before saving too much

Consumers have started to get the savings habit, with a "buffer" remaining in current accounts, and savings in case of a rainy day – yet they also have a credit card balance which they don't clear at the end of the month.

It is calculated that there are 31 million credit card holders in Britain and they are paying £3 billion a year in unnecessary interest charges.

David Kuo, head of personal finance at Fool.co.uk, says: "It makes little sense to have a stash of money earning interest at six per cent per year when a pile of debt is burning a hole in our finances at 15 per cent annually."

"Saving money before you have paid off your debts is like trying to fill a bath without putting the plug in first. It is a pointless exercise that results in a waste of water, an empty bath and hefty water bills."

People aged between 34 and 41 are most likely to be juggling savings and debt simultaneously.

By re-examining their budgeting, householders could find that they save enough money to pay for one of their necessities like their home insurance premium.

28/11/2007 10:55:05