Why borrow if you have savings?

Often when you have enough savings to pay for something, whether it’s something useful or more of an impulse purchase that you could have done without, you tend to think that you’re going to pay for it with the available savings. It is a choice that can be quite judicious and it will depend on the amount of the purchase in relation to the savings available.

 

At first glance, there’s no point in taking out a loan of any kind once you have the savings available, you might say? Useless at first glance only, because there are many reasons to take out a loan when you have the funds available. This is what we will see together, why borrow when you have the savings available?

 

  • Deceptive appearances in the credit / savings relationship
  • Multiple interests to borrow when you have the savings available

Why should appearances tell us not to?

 

With very few exceptions, you will never find a borrowing rate lower than the interest rate you enjoy for your savings in any form: PEL, life insurance… and if you do, it is because, as in the case of a zero-interest loan for example, you meet certain conditions that induce a loan. In other words, the lending institutions will only grant you an advantageous loan rate when the commitment rate at your level is high, much more so than in the case of a “pleasure purchase”: buying a main residence, rental investment, etc.

 

Therefore, why borrow at a higher rate to buy a new car or to go on a trip when you have savings available in your Level A or another investment? For several reasons, here are some of the reasons.

 

What are the advantages of borrowing when you have savings?

 

Let’s take the example of our car for example. The choice can first of all be guided by the conditions of sale and what you can benefit from. For example, you will not be able to benefit from the warranty and maintenance offered for your car by buying it with a cash payment whereas you can benefit from it by leasing it.

 

Of course, this will cost you more in the end, but in addition to this advantage of the guarantee and maintenance offered, you will be able to change your car regularly without the extra charge and use your available funds for other purposes (going on holiday, enjoying various leisure activities) for which you would not be able to benefit from a loan or at a much higher borrowing rate.

 

The other big advantage of borrowing when you have savings available is that you can keep what is known as a “pear for thirst” in case of a hard blow(s). If you don’t have a debt ratio that is close to the limit at which banks usually stop lending to you to avoid over-indebtedness (as a reminder 33%) you can more easily negotiate the terms of a loan with available savings that the bank will see as a safety valve.

 

And if unfortunately, a hard blow should, unfortunately, come your way, the loan will already have been granted with the correct conditions and you will have your savings at your disposal to get through this delicate passage while waiting for things to get better.

 

If, on the other hand, you buy what you want by financing it with your savings and then the hard blow comes later, you will have to try to get a £1000 loan as a matter of urgency and with no savings available in your account, putting you in a much more difficult position to negotiate your loan.

 

How to cut down expenses connected with raising a child?

Many manufacturers of children’s goods hunt for their target audience represented by young parents. Moms and dads easily give in to all marketing tricks, losing all their income to beautiful but unnecessary things. You can avoid unnecessary spending by planning the minimum costs for a child in advance.

Contrary to the opinion that a child is an expensive pleasure, the cost of a baby in the first year of life is low. Usually, expenses increase significantly closer to school, until this moment the following items of expenditure are taken into account: food, clothing, utility bills, entertainment (including toys). A little later, you have to count education and relaxation. Sick baby needs medication and vitamins.

How to reduce costs for a baby up to a year

It is advisable to think about expenses even before the birth of the child: to pay loans, create a cash bag, create an estimate for childbirth, and collect a dowry for the baby. It is possible to reduce expenses for a child up to a year if:

  • Breastfeed the baby for as long as possible. None of the best nutrition can be compared with the benefits of breast milk. Plus huge savings on nipples, bottles, sterilizers, in fact, on the power itself.
  • The cost of a baby per month will decrease great if you choose reusable diapers instead of disposable ones. If you prefer diapers, wear them only while your baby is sleeping.
  • Sew children’s clothes yourself, using unnecessary things from natural fabric: from one adult man’s T-shirt you will get a pair of cute sliders.
  • The first major expenses for a child are usually a crib and a stroller. You can buy a used crib, replacing the old mattress with a new one. If you buy in a store, choose models with additional features or transformers.
  • Instead of a stroller, use a sling or a carrying bag.
  • Inquire, maybe your relatives or colleagues will give the crib and stroller free of charge or at the lowest price.
  • Buy crock-pot and blender. In a slow cooker, you can sterilize baby bottles and cook mashed potatoes and cereals for the baby, food chopped by a blender can be safely offered to the child, instead of expensive food from jars.
  • Do not buy electric carts, walkers, baby monitors and other devices: their use is doubtful, and the service life is too short.
  • For bathing it is not necessary to buy a baby bath: master the infants swimming in a regular bath.
  • Refuse powders, oils, creams and baby emulsions – healthy skin does not need them.

Cutting costs for a child older than a year

The kid has grown up and can eat simple food from the general table: soups and cereals. Such food is healthy and affordable. It is useful and inexpensive to buy seasonal vegetables and fruits, dairy products. In order to preserve health and money, refuse to buy cookies in packs, juices in bags, prepared food. It is better not to give sweets to three years: any pediatrician will tell you this.

  • Even if you do not think about re-pregnancy, keep a year or two of children’s things: this way you will reduce the cost of a second child.
  • Freeze vegetables, fruits and berries, put them in cereals and desserts in winter.
  • It is not beneficial to buy expensive branded items: they will last a maximum of six months. A major expense item is winter clothing. Look for a transformer jumpsuit. There are models designed for children from birth to two years. Unfortunately, you cannot save on shoes for children.
  • After 1-1.5 years, it is worth thinking about developmental activities. If you can not afford children’s centers, look for students or retirees who are ready to work for a moderate fee. In the first, more enthusiasm and creativity, in the second – experience.
  • Toys are an integral part of spending on a small child. Do not buy them at the first request of the baby, it is better not to take him or her to children’s stores at all. Instead of expensive developmental models, give the crumbs crayons, colored paper and cardboard. Finger paints, soap bubbles and modeling dough are more profitable and safer to do on your own.

In case, you need money, you can turn to a lending company for some cash. It can be performed online and in person. They provide financial aid to those who need quick cash for a short period of time.

Posted in Family FinancesHow to cut down expenses connected with raising a child?