Alternative to Savings

There are other ways of paying for some of the things you might want to save for. You might want to consider whether any of these would be a better option for you than saving. These include:

1 insurance

2 state benefits

3 borrowing money

4 selling things you own.

There are pros and cons to each of these alternatives which you’ll need to weigh up when deciding what’s best for you. Let’s understand them one by one.


There are lots of different types of insurance which you can take out to protect you in case of unexpected financial difficulty. The advantage to having insurance is that it can generally pay out as soon as you’ve bought the policy, although there are some exceptions. It can take a while to build up savings and you might not have enough to cover what you need if something unexpected happens.

Types of insurance include:

Household contents insurance which covers you against loss or damage to the things you own

Buildings insurance which covers you against damage to your home

Maintenance insurance which covers you for plumbing and heating repairs

Payment protection insurance which helps you keep up loan repayments if you lose your job, get ill or have an accident

Warranties which you can take out to pay for the breakdown of electrical equipment

Critical illness insurance which pays out if you’re diagnosed with certain conditions such as a heart attack, stroke, certain types of cancer, or losing a limb.

Mortgage payment protection which pays your mortgage for a certain period of time if you stop earning because of redundancy, accident or illness

Income protection insurance which replaces part of your income if you’re unable to work for a long period of time because of illness or disability.

Disadvantages of insurance

Insurance policies often have lots of conditions built in which mean they might not pay out when you need them to. For example, a critical illness insurance policy probably won’t cover all types and stages of cancer.
Some types of insurance have a waiting time before you can make a claim, or might only pay out for a limited period of time. Mortgage payment protection will only start to pay your repayments one month after your income stops and will only pay out for up or 12 months.
Some types of insurance offer poor value for money, such as warranties to cover the breakdown of household appliances.
You might find some types of insurance too expensive.

Government benefits

If your main reason for saving is to protect you against losing your job or becoming too ill or disabled to work, you might want to think about whether you would be able to get any state benefits in those circumstances.
When you get certain benefits, you can also get your rent paid by Housing Benefit or help towards paying the interest on your mortgage. You may also be able to get a grant through the Social Fund for one-off expenses such as funeral costs, having a baby or furnishing a new home.

If you’re able to get benefits, this might affect the amount you decide to save. If you’re on a low income, you might want to think about whether the amount you could save would provide any more money than you could get through benefits.
However, you should be careful about relying on benefits to protect against financial hardship. This is because:
you can’t be sure you will be entitled to get benefits at the time you need them

benefits are fairly low, and might not pay you enough to cover the costs you face

the amount of money available for Social Fund grants is limited and might have run out by the time you need it

in some cases, you have to wait before you can get help. For example, most people under 60 have to wait for 13 weeks before they can get help towards their mortgage costs.

Borrowing money

If your main reason for saving is to pay for treats or something specific such as a car or an expensive piece of furniture, you might want to borrow the money instead of saving for it. However, borrowing money can be an expensive way to pay for something, because you will have to pay interest on your loan.
If you can’t afford to save, this might be the only way to buy what you need. However, you need to think very carefully about borrowing as an alternative to saving up for something, as it’s almost always cheaper to save money than to borrow it. Other reasons why you might want to borrow rather than save for something include:
you can’t wait to save up for something because you need it now and it would take you too long to save what you need. However, you should try and work out whether you really do need the item now or whether you could wait for it the price of what you need is likely to go up. The saving you make by buying it now might outweigh the cost of borrowing. This might apply to something in a sale. On the other hand, if the price is likely to go down, you might be better off saving up for it. This usually applies to computers and other electrical goods such as TV.

you realize you’ll pay over the odds by borrowing to pay for something now but you feel the cost is worth it and you know you’ll be able to repay the money within a reasonable period of time.

Selling things you own

You could think about selling something you own to pay for something instead of saving up for it. You might want to do this to pay for something you need now, or for something you might need in the future. One example of this is an equity release scheme which is a way of using the value of your home to raise money.

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