Given the current job market, saving money is an important goal for many people.
However, when facing debt problems, some consumers may consider using their savings to pay off loans. In a recent column for the Los Angeles Times, financial expert Liz Pulliam Weston answered a letter from a reader who has $16,000 in emergency savings. The reader was considering getting a fixed-rate loan in order to pay off some of her debts.
Pulliam Weston said that a fixed-rate loan may be a good idea for some consumers. However, she noted the reader should consider using their savings to eliminate their credit card debt.
“Unless you’re in real danger of losing your job, using your savings to pay off the cards is a virtual no-brainer,” Pulliam Weston wrote. “Clinging to cash that’s earning less than 2 percent doesn’t make sense when your debt is probably costing you a double-digit interest rate.”
Recently, the U.S. Bureau of Economic Analysis reported that the amount of money saved went down in August. As a percentage of disposable income, savings fell from 4 percent in July to 3 percent in August.