savings when you have debts?

[ThatRareLimeFinch]

just this really.

in my younger years i amassed a fair bit of debt, think unpaid bills, store cards etc, when in a bad relationship where every penny went on the other persons addiction.
as you can imagine this obliterated my credit score.

the last 3 years, i have managed to step away and have finally sorted my life out away from people with addictions, and all my bills etc are up to date.

i had 2500 i had saved from 2 benefit back dates.
i have recently paid 1000 of this to the local council and set up a further direct debit monthly to pay off the rest of the debt i owe them.

so have 1500 left in savings.

i still have around 3.5k in debt, most of it 4 plus years old.

i want to really get this down over the next year, but i dont know if i should use what i have left in my savings to pay a chunk of it off, or to keep my savings, and pay it bit by bit.

i could wipe a few of the debts off completely if i used my savings, but what happens if somethings crops up, like car needing repairs( its 14 year old and i cant afford a new one ), vet bills etc. as i have no access to credit/overdrafts

YABU - use the savings and clear the debts you can
YANBU - keep some savings just in case of emergencies and pay off debts bit by bit

Can you save anything per month?

Two questions - do the saving earn more than than the equivalent amount of debt costs (unlikely) secondly, how easily could you come up with (borrow) some or all of the value of your savings if you needed it (eg credit card or overdraft probably.

If the answer is that your debts cost more and that you could borrow at short notice if needed, then wipe the debt. The debt is a certainty, whereas the rainy day is a possibility that you can solve in another way

Pay off the debt first especially if it's high interest. Unless your savings happen to have a higher interest rate than your debt (e.g. 0% credit card and 3% ISA or something).
I would assume that for a rainy day you would then start to amass the savings back up, or worst case scenario if you need emergency funds sooner, take out a fresh loan to cover (not ideal but at least you're not paying high interest in the meantime and hopefully this won't happen).

What's the interest and the balance of each debt?

Are you in a position where you can access a 0% credit card or interest free family loan if you needed to fix your car in January and had used all your savings on your debts?

How much money do you have a month to pay your debts over their minimum repayments?

i couldn't come up with the equivalent of my savings if i needed to. no CC, overdrafts/ family to ask etc. credit history is too poor for these.

debts are all now with recovery groups so not gaining interest

no possibility of loan to cover emergencies unfortunately, this is why im wary of spending it all.

just to clarify a couple points:

all the debts are with debt recovery companies now so not gaining any interest on those.

no chance of CC, loan or overdraft to pay for emergencies.

Well done making a start on repayments.

Keep the savings as an emergency fund as it will stop you running up more debts if a true emergency comes up. It'll also give you the opportunity to budget sensibly across the year factoring in your debt repayments which is a good habit to get used to.

Do not use your savings then. The debt isn't costing you interest. If you use your savings, and then need them for an emergency, you'll have to turn to expensive debt again

I agree that in this situation it is better to keep your savings accessible so you don't have to resort to racking up more debt in the event of an unexpected expense (car repairs, child needs new [whatever], etc).

Can you work out a budget that will enable you to live and make some progress on the debt leaving the £1500 untouched. If you can I would take that approach and keep your savings for emergencies. Well done and good luck on your debt free journey. Martin Lewis has a forum where people post about their debt free journeys you might find some interesting stuff there

Firstly, fair bloody play - poor relationship, supporting addiction, reckless spending and out of control debt - you've overcome a lot and I hopd life is so much better for you now.

You can't afford not to have savings - you have no access to credit for emergencies.

If you are paying £100 a month, you are debt free in less than 3 years.

How much have you available to service the debt monthly?

Can you start overpaying one of the debts?
Given the interest is frozen, start with the smallest one and when that's cleared move that repayment to the next one in addition to what you are already paying.

@ThatRareLimeFinch @AwfullyGood hits the nail on the head! Well done you lovely 💐

If the answer is that your debts cost more and that you could borrow at short notice if needed, then wipe the debt.

No, she's trying to get off the debt merry go round, not being ready to jump on it again.

Always have an emergency fund of £1,000. Then start paying off debt.

I think you’ve done amazingly, I agree you should keep the savings intact. Hopefully the debt is on its way to being cleared and as you say it is on a no interest basis it makes no sense to clear it off. If anything I would try and add to your savings even if it’s only £20 a month as if your car is 14 years old it wouldn’t take much for it to completely wipe your savings. As you clear individual debts split the money you were paying on that one 50/50 to clear other debts and add to savings. Good luck it really does sound like you’ve got this.

Personally. I would apply for a credit card on Clear Score, Vanquis will give u card with £50 credit limit if your that bad and get your limit upto a limit you are comfortable with.

with the outstanding debts, just carry on paying them as per the agreement until they are paid off.

As for your savings, I would try to add a few pounds every week.

Have you looked at Zopa - the current account is called biscuit. It gives you 2% on the 22nd of each month for the direct debits - if your direct debits are £1,000 a month that’s £20. Also, they have a savings account where u can put £300 a month away and they give u over 7% interest, it’s not bad.

would £20 a month help towards the electric?

Best of luck and I hope 2026 is your year xxx

Are you paying off your debts that are with debt recovery companies?

If so I would invest your savings in the highest interest rate account you could find to cover yourself for emergencies.

Then focus any leftover income into paying off your debts

Since your debts are now fixed without interest, it makes most sense to have savings for emergencies so that you do not need to go into any new debt. But obviously, you should be paying off the rest of the debt as soon as possible in monthly payments.

If you are not paying interest then I would put as much as you can into a Savings Account on a monthly basis. I Understand completely how you would like to be free of debt, but you are being really sensible to keep money aside for emergencies. There is more peace of mind to be gained from having a cushion than being debt free. Once you are debt free you can start to build up a good credit history.

I'm definitely not an expert on this (some others might be?) but what about 'Help to Save'? I don't know all the details, but may drip the money into that account (max £50 per month) . You need to be on some sort of benefits and you'd need to look into how to withdraw and how that impacts what you get paid. Might be worth it for the first 2 years? There is something on MSE on it.

Tbh if you are eligible and have £1500, I would deffo look into help to save ... Even if you pay in for 12 months (IE £600), you'd get £300 after 2 years. That's pretty good- particularly as your debts aren't accumulating interest and you need somewhere safe to store the £1500 that gets you a return.

Most people I have known who have gotten themselves out of debt have had an emergency fund of some sort.

They’ve given various reasons:
It’s heartbreaking to have to increase debt when an emergency happens when you’ve worked so hard to pay it off
It gets you into a good habit of saving
It gives you a positive goal as well as a negative one
Gives you a sense of security
Let’s you like yourself again, feel a little bit proud of yourself.
You never know when a line of credit might be withdrawn so having cash savings might be vital at some point,
as you might not be able to access credit or only at a much higher rate than you got before

Pay the agreed minimum to debts whilst you build a starter emergency fund. Then pay more off the smallest debt until it is gone.

This is the debt snowball method that Dave Ramsey and others suggest as it has worked for so many people.

Well done for taking action. You are on your way now, working towards paying back the debt. Emergency fund is vital to stop you going back into more debt.

Video about Ramsey Baby Steps

Logically, it’s wise to clear the debt first, as the interest rate on that will exceed any interest you would get on the savings. HOWEVER if you have no back up person/plan, I would keep the chunk you have for emergencies. But be very strict that it really is only for emergencies.

if you have the time take a look at Rebel Finance School - they have a series of videos on YouTube that are extremely helpful and even if you are not aligned with their ultimate goal (investing to achieve early retirement), they have great stuff on clearing your debt and building an emergency fund.

https://rebeldonegans.com/finance/rfs/