Saving holiday pay or paying off debts?

Everyone receives holiday pay in the month of May. For some, this is a nice extra, for others it is necessary to fill in financial ‘gaps’. Where one person actually uses the money to go on a nice vacation, the other pays arrears with it or puts it in the savings account. Every goal has its advantages and disadvantages. But what is the smartest thing?

Saving holiday pay or paying off debts?

Saving holiday pay or paying off debts?

The most sensible thing is of course to pay off any debts with your holiday pay. You pay interest on these debts, sometimes up to 15 percent. That is much more than the savings interest that you receive at banks. It is therefore always cheaper to pay off debts with your holiday pay than to put this on your savings account.

Saving holiday pay – Financial buffer

Saving holiday pay - Financial buffer

A financial buffer on your savings account always feels good. Even when the interest rate is low it is worth saving. Because something can break at any time, so you suddenly need a substantial sum. Think of your car, washing machine or central heating boiler. You would rather buy a new one immediately, instead of taking out an expensive loan, on which you have to pay interest again!

Saving holiday money or paying off a mortgage?

Saving holiday money or paying off a mortgage?

A mortgage is also a form of debt on which you pay a substantial interest. The holiday pay is of course only a small amount compared to your mortgage. Nevertheless, it pays to redeem this faster with your holiday pay. Check in advance with your mortgage provider if there is no penalty for accelerated repayment of your mortgage!

Saving holiday pay for later

Another interesting destination for your holiday pay is saving for later. This is possible as a supplementary pension for yourself, but you can of course also save for the study of your child or grandchild. The great thing about this destination is that you do receive interest on the amount that you deposit, but it is not (yet) seen as assets. So now you do not pay capital gains tax on it.

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