What is smarter: saving or paying off a loan?
“I also get nothing for my savings anymore.” But in the meantime just keep saving nice. Recognizable? Probably. Because in the spring the total money box in the Netherlands amounted to € 343.6 billion. also has a loan, and I don’t understand that very well, because a loan costs much more than saving, which is why this week the key question is:
save or repay a loan ?
Average savings interest less than 1%
The savings interest has fallen dramatically in recent times. The interest rate of most large banks is below 1%. This negative trend is expected to continue. Time and time again the European Central Bank lowers interest rates. This makes money increasingly cheaper. And so banks want to pay less for consumers’ savings.
High savings tax
It is not only the low interest rates that make it unattractive to save. There is also a saving tax: the capital gains tax. If you have more than € 21,333 in savings, you must pay tax. Namely about the assets above € 21,333. When calculating the savings tax, the Tax and Customs Administration assumes a return of 4% on assets. You then pay 30% tax on that return.
Many people think it is unjust. I agree with them. Of course, if you invest your money smartly, a return of 4% is certainly achievable. But for most people the money is just in the savings account. With a return of less than 1%. That is 3% less than the notional return that the Tax Authorities calculate.
Your savings are also worth less due to inflation, which means you lose double money.
Then better repay
As long as you do not borrow money and only save money, a low savings interest still remains more than no interest. But if you have a loan on the one hand and you save money on the other, you’d better pay off your loan. Because the interest you pay for your loan is in any case higher than the return on your savings account. Saving and borrowing is a waste of money. Pay off!
Keep a financial reserve
Always make sure you have money in hand. For contingencies. It would be annoying if, after paying off, you have to take out another loan because your car breaks down. Easily calculate online how much you should at least keep on hand on the Nibud website.
Hopefully it is now clear to everyone what the benefits of paying off are. And especially that it costs unnecessary money to both save and borrow. So don’t. Just pay off your loan and enjoy a debt-free existence.