"if you have debt, you shouldn't have savings"

this is what was said to me by the lady behind the counter at the credit union yesterday when i made a lump sum payment on the mortgage.
i thought, "no, i'd rather have some savings too" little wonder i don't save it with them or anyone else. cash in possession, for whatever reason seems more reassuring.

 

I see what she means, debt should be your first priority, if you have a mortgage redraw then you can have the best of both worlds

 

Yes, she has a point.
Cash is not working for you, it's just there to satisfy any "reassuring" feeling human minds desire.
Mortgage redraw is certainly the best of both worlds if you were as you admit, saving it up to make a lump sum payment on the mortgage.
Having some cash to cover yourself due to banking system problems is of course worthwhile.

 

Redraw feature is good, but what you really want is an offset account :-

https://en.m.wikipedia.org/wiki/Offset_loan_(finance)

 

Much of a muchness.

 

Some subtle differences.

Redraws can often have some extra fees attached to the redraw. The offset can also make things easier to manage as savings/transactions can be high volume and readily quarantined.

 

Offset is usually the better option for most. Offsets give easier and cheaper access to your cash with more flexibility. Redraws can be costly and there can be a minimum withdrawal of a few thousand. Some even require a few days notice.

Would only use a redraw if I want to pay the Principle down more quicklier and need the discipline to do so.

 

Or an offset account

Edit - pays to read the thread... offset it is.

 

where did i admit that i was saving it up for lump sum payments? the lump sum payment didn't come from my savings.

 

Can confirm offset is the bees knees
Not too long ago my bank was offering to open offsets for free with no ongoing charges so opened a few, one for "savings" and the other I've linked to my income stream.

 

what if you can make more money with the money than it cost to get it?
eg I went into debt to buy 2014 $1 mint rolls when they were released, haven't stopped crowing about that to the missus

 

You haven't made a cent until you sell them.
And they don't provide any compounded return.

 

Maybe she was suggesting the idea of a balance sheet.

 

Bank/credit union staff are now under constant pressure to cross-sell financial products from their institutions.

Insist (politely) that she should mind her own business instead of offering unsolicited financial advice.

 

I worked at a credit union and know that unless you have the accreditation as a financial planer you can't offer financial advise