Regular saving but overdrawn

[Slimemonster]

We have been trying really hard every month to save money in a high interest savings account, however both hubby and myself are overdrawn by the end of the month to the same amount as the SO savings. So is there any point in saving?
To avoid drip feeding
We budget as much as we can.
We private rent a tiny house, it's feeling very outgrown with 2 children.
One f/time employed, 1 p/time.
Receive UC since lockdown affected my employment.
Long term plan to buy a shared ownership house (the savings are for the deposit and fees)

It's taken 6 years for us to scrape together 5k.... It feels painfully slow.
And then all the bills and food prices went up so we are still chasing our tails! 😅
Just looking for a bit of advice/opinion I guess.

What is the overdraft interest rate?
It's pointless saving if you pay more in interest on the overdrawn balance than you make in the high interest account

Keep saving.

Then when you've reached saving goal, save the equivalent of overdraft and pay it off, and stop saving to stop going back into OD. Remain this way for 6mo and then begin applying for the SO. X

Why would you save if the overdraft charges then need to be paid? Surely its best to get rid of the overdraft and then save? Or save a little less each month and pay off the overdraft gradually.

www.moneysavingexpert.com/savings/pay-off-debts/

Overdrafts are usually the most expensive way to borrow money.

Am I right in thinking your overdraft is not growing month on month? So if you pay back your overdrafts one month instead of saving you won't need to use your overdrafts?

What I would do is pause saving, you've got an emergency fund there now. Repay your overdrafts with your income next month. Examine your outgoings and see if you can cut your budget so you can afford to save without going into your overdraft.

Saving by accruing debt is not saving. If your overdraft is getting bigger you can't afford to save more until you get that sorted.

If you’re always overdrawn by £300, say, and your standing order to savings is £300, just don’t save that one month and get back into the black, then start saving again.

Do you have a really good handle on your budget, not just monthly but saving up for things that come around less frequently? It sounds like you might want to revisit the day to day budget and look at how you started to slip into overdraft?

I agree with those saying pause the saving for one month, clear the overdraft, then save again.
And try very,very,very hard not to slip back into the overdraft.
There is absolutly no point saving when you have a debt with a higher interest rate (assuming the overdraft is higher interest rate than the saving account!)

I think the savings are probably still worth doing. If, for example you are saving £100 a month and you are overdrawn nu that. amount at the end of each month you are still better off. If you save for 6 months you have £600sabings. If this causes £100 overdraft and you begin the month with that right again you have money in a savings account which would have probably been used in your current account. It's only not worth while if you mean you are accruing an over drawn amount which isn't paid again at the start of the month which ends up with £6OO overdraft.
If you can nearly make it to the end of the month before becoming overdrawn you would maybe make a special effort not to touch the savings whereas if left in your current account they would probably get spent. Plus the savings are still there if needed. So that if you had two really tight months and drew back £200 you would still have £400 but left in current account 'in case' would probably be spent.
Of course this example works best if what you save isn't in an account where you don't lose interest for withdrawals. Even if you do you still have the remaining balance of savings.

Surely you know what your bank's overdraft interest rate is?

And your savings interest rate?

Overdraft interest rates can be up to 40% and its unlikely you will be getting that rate on a savings account.

What are you paying in interest on the overdrawn balance? If it's more than the interest you are earning on your savings then it would be silly not to pay off the overdraft before saving again.

Thankyou everyone, I actually can't find the overdraft interest rates.
I bank with Halifax if anyone knows where on the app I can find the rate please? Just spent ages looking!
It's a daily charge for the overdraft and its pennies but it increases daily.
Our overdrafts aren't ever increasing, We have them limited too.

www.halifax.co.uk/bankaccounts/overdrafts/cost-calculator.html

This has a cost calculator.
Says the interest rate on arranged overdrafts is 39.9%

I would say keep saving if you can. If you save you will have savings so that’s £5k you would otherwise not have. Irrespective of the interest rates.
But yes try and clear overdraft to start afresh and not go into it each month if poss. Could you or dh earn / work more?

How overdrawn do you go and for how long?
The higher the overdraft and the longer you're overdrawn the more you will pay

But if she pays more in overdraft interest than she makes on savings then she is losing money not gaining it.

Anything between £20 and £200 across all our accounts. It's always that last week/few days before payday that get us.

You do realise that you're advising the OP to borrow money at 40% interest to save it at around 5% interest?

Where's the sense in that?

OP, if the interest on your savings is 5% (will probably be less than that), that's £20 pm interest tops, leaving you cost neutral.

However, you say your interest charges/interest/fees/however they dress them up are at least £20 pm, but could be as high as £200, so very very expensive.

Pay off your overdraft and start again with savings. Even if you only managed to save the interest you're not paying on your overdraft, you'll probably be able to put by £1k pa. Maybe reduce the authorised amount to £500 or less and pretend it doesn't exist, it's only there to make sure none of your DDs bounce.

You'd be a lot better off using a credit card to manage cashflow. If you put your normal essential spending on a credit card (eg groceries, petrol, travel, budgeted extras) and pay it off in full every month, it delays all this sort of spending from leaving your account for 3-7 weeks, so makes it much easier to cope with the ups and downs of income and expenses. This is completely free and you may even be able to make a small profit if you get a cashback or points card.

Apologies, I probably wasn't being clear.
Our overdrafts are limited to £200 each.
We dip into the overdrafts each month by random amounts usually anywhere between £20 and the full £200.
Yes my savings account is only 5%
Judging by other commenters above we are assuming the OD fees are maybe 40% although I can't find it anywhere on the banking ap.
Not keen on CC's as hubs has previously ran them up by ££££'s but definitely a great idea for someone else.

Have one month without putting anything into savings while you clear your overdrafts, then start saving again next month?

The cost calculator I linked to earlier says the overdraft interest rate is 39.9%

Why can you just not stop saving for a couple of months to get out of the overdraft and then start again