This is a topic that comes up fairly often, and is something I have given much thought too. Which is better, to pay off your debt, or to begin saving money?
Paying off your debt tends to be a better option on paper due to the fact that most debt is above the average returns from investments. As such you will end up with more money if you can pay off those debts first.
But for people just getting into the mindset of improving their financial standings, saving and investing is an important habit to begin.
As you can see by my last post I have small investments that I contribute to regularly which has gotten to be a habit. I spend more each month paying off debt than I do investing, but at least I have started the process . It is important for me to be able to see positive growth in my finances to keep me motivated. $50/month towards my IRA and $100/month towards my stock/etf's is not much, but it is a start. Over this next year I plan to increase each to $200/month.
My Savings account is set up for multiple reasons. The first of which is to provide me with my Emergency fund. I am a self-employed carpenter and as such need cash that I can use in case of personal injury which could put me out of work. This account is also my catch for the tax money I will owe come April 15th.
Good habits with money is what we all strive for. For myself I needed to set up these avenues to save and invest for the motivation and security they provide. Paying off debt first would be better short term, but for long term goals it pays to begin forming your habits as soon as possible.