Start saving while repaying your mortgage
When taking out a loan, the loan amount and monthly repayments should be calculated in a way that gives you leeway to build up your savings at the same time.
Many people think that you should first pay off your loan as quickly as possible before you can start saving. But when it comes to regular saving, the earlier you start, the better the results.
- The effect of compounding means that the total return from your monthly savings will grow year by year. The interest you earn on your savings is added to the principal. As well as earning interest on the savings, you also earn interest on the interest itself.
- If you have earmarked a specific amount for repaying your loan each month, one option is to extend your loan period. This will allow you to set some of this money aside for your monthly savings.
- When you save money while repaying a loan, you are building a buffer against any unexpected expenses, which will grow over time. So you are getting more for the same monthly amount.