The BBC and ITV star
was responding to a question from a listener on his BBC podcast, which he features on alongside Adrian Chiles, when he explained his advice.
Martin Lewis has shared some key advice for anyone with £1,000 in savings. The BBC and ITV star was responding to a question from a listener on his BBC podcast, which he features on alongside Adrian Chiles, when he explained his advice.
The 52-year-old BBC presenter gave his advice over how to manage £1,000 in savings. Writing in, the listener asked: “Hi Martin I’ve heard you say before to pay off credit card debt first before saving. I also know the sensible thing is to pay your credit card off every month.
“But how do you pay off credit card debt which has accumulated while making sure you have liquidity for emergencies life for example a boiler or something. What’s the best way to pay down credit card debt and maximise savings for emergencies at the same time?”
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The Money Saving Expert founder and ITV regular said: “You are quite right. I do always say you should absolutely prioritise paying off expensive credit cards before savings. You asked me about liquidity but I’m actually more concerned about having funds to pay.
“And I make that difference quite deliberately.” He said: “Imagine you have £2,000 of debt on an expensive credit card that’s accrued and you want £1,000 to put in savings. In the way you’re explaining it you can’t use that savings to pay off the debt because you want to keep that savings aside for the emergency fund.”
He added: “Now, I’m in favour of emergency funds, but not while you have credit card debt. Here’s why. Take that £1,000 and pay it off the credit card. Your situation before was that you had £2,000 debt and £1,000 of savings – a net £1,000.
“Your situation now is you have £1,000 debt on the credit card and you have no savings. So what happens in the event of an emergency?”
He said: “Well, in an emergency, you’ve got £1,000 of room on your credit card and you go back and put it on the credit card again.” He added: “That would leave you in no worse a position that you were in before – because you still had £2,000 credit card debt before – but in the meantime if there isn’t an emergency, you’ve got £1,000 less debt on your credit card that you’re being charged 25 per cent interest on which means more of your money that you are earning isn’t having to pay the debt interest and you’re better off.
“So by paying off the credit card, you’re still leaving yourself room to use those credit cards if you have to in an emergency – but in the meantime, you’re saving on them.”
