Pay Up Front, Save A Bundle

Recently I blogged about how hard it is to save.  One thing that makes the pain easier to bear is to have a REASON to save.

There are lots of good ones.  Here’s one, for instance.

My car insurance is a twice a year premium, while my home insurance is billed annually.  However, my insurance company also gives me the option to break these two payments down into monthly payments.  Oh, that’s nice of them, that makes it easier on my budget.  Right?

Wrong! It turns out that Nice has a Price.  According to Allstate, that price is a $4.00 per month installment fee.  If I choose to pay monthly, over the course of a year that would amount to an additional 5% fee.  That’s a pretty nice little extra somethin’ somethin’ for Allstate, considering they don’t have to do much at all to earn it.

$4.00 per month may seem like a small amount to pay for the convenience of not having to come up with all that money at one time.  But when you look at the big picture - the percentage picture - then that’s something else again.  After all, I know that my savings is not making anywhere NEAR 5% interest right now.

Also, this is a great illustration of one of the many ways that not having any savings keeps you “poor”.  If you don’t have the funds to make that big payment up front, then you must resign yourself to the installment option.  But at the end of the year you will be poorer for it, as if the insurance premium itself was not bad enough.

Having some savings in the bank allows you to live life on YOUR terms.  You can be in control of your money, instead of being forced into spending more money simply because you don’t have any money. That is a cruel cruel paradox. It’s what makes credit card companies so rich, too.