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How to Save Money While Paying Down Debt

February 24, 2021

Saving money in jar to pay off debtWhen you have a sizeable student loan, car payment, or appliance bill that you’re making payments on each month, it might seem impossible or even unwise to put money away into a savings account. Experts say that having a designated savings account for unexpected emergencies is the way to go—but how do you save for the future when you’re trying to pay for the last emergency?

According to a 2020 survey, 23% of adults have added to their credit card debt during the coronavirus pandemic. Building an emergency fund with enough money to cover three to six months’ worth of expenses is the best way to be prepared for a job loss or other unforeseen circumstance. But that’s not so easy when you’re juggling high-interest credit card debt, paying off a car loan, or even a government-subsidized student loan. All of these things are even tricky when you’re gainfully employed, much less living paycheck to paycheck.

Luckily, you're not alone! Here are 3 easy steps to get you started in your saving journey: 

Step 1: Evaluate your debt
Not all debt is created equal. Take a look at all of your debt and the accompanying interest rates. Mortgages and student loans are typically referred to as “good debt,” meaning they are investments in yourself in order to help you move forward in life. Credit card debt and payday loans are considered “bad debt,” because the interest rates are typically high (sometimes $30 for every $100 borrowed on a short-term payday loan) and can get out of control easily. Make a list of outstanding debts and categorize them by interest rate and payoff time/terms.

Step 2: Make a payoff schedule
This is when you must to strike the balance between paying off your existing debt and building an emergency fund—and if you’re able, establishing a retirement savings plan. The key here is to ensure you do not take on even more debts/loans during this time. Establish a debt payoff schedule that helps you forecast when your consumer debt will be paid off. Centier’s Money Management Tool is designed to help with budgeting.

Step 3: Make a savings plan
Get in the habit of paying yourself first. Budgeting each month ensures you’re on track to pay off the debt you’re working to chip away at--even putting away $50 each month can result in $600 at the end of the year (plus interest!). Having any savings will “soften the blow” that can occur with surprise expenses. Centier’s Financial Education Series, Centier To You, offers free e-courses on savingbudgeting and paying down debt. Consider prize-linked savings accounts that reward you for saving—like Billinero, powered by Centier Bank. Billinero rewards users for their good savings habits with chances to win even more money in monthly and quarterly drawings.

What else can I do?
Additionally, when it comes to 401k accounts, ensure you are contributing the minimum required to receive your company’s match. That is “free money” that accumulates over time, and your future self will thank you later. For emergency funds, find an account with a high interest rate so you can grow that money as much as possible. That way, when your car needs a new transmission or you need a root canal, you are prepared to soften the blow to your overall financial health.

Once you have reached your financial goals of eliminating consumer debt, you can then open another savings account that is your personal vacation or indulgence fund. Some experts refer to this as a “sinking fund”—essentially a line item in your monthly budget that gets saved for a specific goal. Having separate savings accounts is considered by some experts to be a good idea—especially if they are high yield interest savings accounts. Abide by the “set it and forget it” method, ensuring your direct deposit is organized in such a way where a set amount is automatically deposited into a corresponding account. If this isn’t an option, just make sure you “pay yourself” every pay day by saving for unexpected emergencies and future vacations and big purchases.

For more information about America Saves Week, go to For more information on how Centier To You can help you develop good savings habits, go to

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