RPH Finance

It can be difficult at times, knowing how much money we should be spending and how much we should be saving. It can be tempting to assume that we should always try to save as much as we can and we may feel pressure to save more. However, there might be better things to do with your money. It is worth understanding the advantages and disadvantages of saving so that you can decide.

Advantages

• Have money to fall back on – it can be good feeling knowing that you have money to fall back on if you need it. You will be able to know that if you have an emergency and need money, that there will be money available for you to spend. This should help you to feel better about any potential financial problems that might come your way. If you get an unexpected bill or have to pay out for a repair or to replace something then you will have some money there to help you out.
• Earns interest– When you put money in a savings account it will earn some interest. This means that you will gain something from that money being in the account. This is better than having it at home or spending it when you will not make this money from it. Banks vary in the interest that they pay and it is worth comparing them to see which you like the look of the most.
• Feeling of security – it can feel more relaxing if you know that you have money behind you. Knowing that if you need it you have some funds can be really great. You will not need to worry so much about potential price rises or tax increases or about things you may need to buy in the future as you know that there is money there if you need it.
• Might prevent borrowing – if you have money available to spend then it could mean that you will be able to avoid borrowing money when you need it. This can save a lot of money as some forms of borrowing will cost a lot. Borrowing will also appear on your credit record and you may be wanting to keep it looking good for the future.
• Can save up for expensive things– if you want to buy some expensive items then by saving regularly you will be able to build up a pot of money that will pay for it. This can be very satisfying; knowing that you can save up for things like this. You will also be able to avoid borrowing to buy things like this, which may even be something that you will not be bale to do if your credit record is not good enough.

Disadvantages

• Interest rates are low – the problem with savings these days is that the interest paid is not very high. This can put people off as they feel it is not worth bothering to keep money if they get so little in return. When interest rates were much higher, people were far more likely to want to save as they could get significant returns.
• Might be better to repay loans – loans can be expensive and if you have them, then it could be better to use spare money to repay them, rather than to save the money. If you compare the interest that you are being charged on the loan to the interest that you are being paid for your savings, you will find that it most cases the loan interest is higher. If this is the case then it can be better to repay the loan rather than save money.
• Might be tied up – if you want higher interest on your savings then you may have to tie the money up. This could be in a notice account where you have to wait a certain number of days or months to get the money or in a bond or similar where you have to lock your money up for a year or number of years to get a certain amount of interest. If you do this it means that you will not be able to get the money if you need it or if you do get it you will have to wait a while or take a cut in interest in order to do so.

As there are advantages and disadvantages to saving, you will have to decide whether you think that you should save more each month. If you do decide to, then you will need to think about where that money is going to come from. You will have to cut down your spending and this could be easier for some people than others. You will have to prioritise what you are buying so that you know that you can manage to cover the cost for all of your essentials before you put some into your savings account.

Many people enjoy playing the lottery. They like the fact that they might have a chance of winning a big jackpot and it is easy to find yourself imagining what you might do with a big win and who you might help out with the money. However, the lottery costs money and many people that buy the tickets cannot really afford to. Some might even struggle to cover costs or get into debt because they spend so much. It is therefore well worth thinking hard about whether it is the right thing to do.

Odds of winning

The odds of winning the lottery are very low. However, many people will convince themselves that there has to be a winner so it could be them and they might win a smaller prize anyway. However, often they do not realise quite how small the chances of winning are. Scratchcards, for example have a 1 in 3 chance of winning. This sounds pretty good and it makes you feel that if you buy three cards you will win enough to cover the cost. However, this is not right. Often the prizes that you win are less than you pay for the card. Even if they do cover the cost of the card, if you buy three then it will not cover the cost of the other two.

If you just note down how much you spend on the lottery and how much you win, you will see that you are not making back anything like the amount that you are paying in. Unless you are a big prize winner then this is just not possible. However, we can often think that it might be our turn soon or that it is time for us to be lucky. Unfortunately, odds do not work like this and luck does not exist and these things are just made up by the National Lottery to try to get you to buy tickets as they want to profit from you.

Charity

Many people will justify their lottery purchases because they help to fund charities. It is true that some of the money made from the lottery does go to charities but some will be paid in profit to the company running it as well. The charities are chosen by the company too, so you get no choice as to what it goes towards. If you want to give to charities it might eb better to take part in raffles run by that specific charity. You may still have a chance of winning but a much bigger percentage of your money will go to the charity itself. You will also find that you can choose the charity that you give to which will be better. It is likely that you will favour one charity type over others and that you might even have ones local to you that you support already. By giving to them, you will be making sure that your money ends up helping those that you really care about.

Alternatives
If you still like to have a chance of winning a big prize, then there are other things that you can try. Some people buy premium bonds as there are monthly draws for prizes. These can be bought form £25 so you may have to save up. However, if you play the lottery daily then it may not take long to save up that much money. The great thing about premium bonds is that your money is safe. You buy bonds which are entered in monthly draws but you can sell them and get your money back within a few days if you want to. This means that you have nothing to lose apart from the higher interest you could potentially have gained having the money elsewhere.

Another way to gamble a bit more safely is to find an investment. If you put the money into an investment that you would otherwise have spent on lottery tickets then you could be better off. If you choose the right investment then you could end up making a significant amount of money from it. Do be careful though as some investments are very high risk and you could end up losing more money than you pay in. So do your research well so that you know what you are doing.

Decisions

It is worth stepping back and taking some time to make a decision about what to do with regards to lottery spending. If you work out how much you are spending and how much you are getting back, that might be enough to make you spend less or stop spending altogether. It is worth thinking about whether you would like to find an alternative where you will be able to still have a chance of winning but have less chance of losing the money.