Household budgets 'have to move from borrowing to saving'

By Sarah Engle, Tue 8 Feb 2011 - Published in Banking

It will take some time for people to switch their financial focus from borrowing to saving, an expert has suggested.

Mark Bower, managing director at moneymaxim.co.uk, said that the UK's households will not be able to shift their budgets immediately and will need space to rebalance their finances.

The commentator claimed that the most important priority is to pay down expensive forms of debt first, as there is little point ignoring a credit card bill with 18 per cent interest attached to save into an account with a two per cent return.

"What is important is that the credit card bill starts to fall - month on month – and, if possible, the debt moved to a cheaper repayment programme," he added.

Mr Bower said that once this is achieved, households can start to build a savings pot with the surplus money that is released from debt repayments.

Recent research published by Scottish Widows found that 38 per cent of people believe they will be unable to save enough over the course of the coming year.

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