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Can Energy Efficient Appliances Help You Save Money?

Have you thought about going green to help save the environment but have been worried about the extra cost involved with more expensive appliances? But, what if energy efficient appliances can actually help you save money in the long run?

For the last few years, "sustainability" and "environment friendly" have been some of the hottest buzzwords around the world. Still, many people may still feel some wariness towards "going green" due to the fact that it may cost more and could be less convenient than what people are used to. But, what if green lifestyle could actually be more economical than non-green one? If this were true, consumers actually could help reduce the society's carbon footprint while also saving money for themselves. In fact, our analysis shows that energy efficient appliances actually are cheaper than regular appliances over the long run.

How Much Do "Green" Appliances Actually Cost?

When comparing the upfront purchase price of appliances, it may seem that energy efficient ones are indeed more expensive than their more energy-intensive counterparts. For example, 5 tick air conditioners cost about S$600 (or 19%) more expensive than 2 tick air conditioners on average, while 3 tick refrigerators cost about S$200 (or 18%) more expensive than 2 tick refrigerators. Washing machines were an exception, where we saw minimal price difference between different energy consumption ratings.

Energy efficient appliance can cost about 20% more than less efficient ones

However, upfront purchase costs are really only half of the story when it comes to large household appliances. Because these machines tend to be used very frequently and also consume a high level of energy, their long-term usage costs also need to be factored in their cost calculation. Indeed, taking this into account actually showed that green appliances can be much more cost effective in the long run compared to less efficient ones. For instance, 5 tick air conditioners tend to consume 2,400kwh over a year on average (costing S$650), which is 30% lower than what a 2-tick air conditioner consumes. Therefore, an owner of a green appliance could make up for the difference in purchase price (S$600) in just about 2 years, implying he would spend the next 7-8 years "accruing" savings by consuming less energy.

Energy efficient appliance consume 30% less energy than less efficient ones

Ways to Reduce the Burden of Higher Price Tag

Still, not everyone can easily spend the extra couple hundred dollars upfront with hopes that they will save more money over the next few years. Afterall, you have to make do with what you've got. If you try to buy something you can't really afford and leave yourself with a credit card debt, the interest on that unpaid balance itself could be significant enough to hurt you more financially. Still, there are realistic ways of helping you make a more optimal long-term choice (economically and environmentally) when you are purchasing an energy efficient appliance.

First, while it's not advisable to use credit card to spend more than what you can afford, you should still be using them to pay for your appliance and earn shopping rewards. This is because it's relatively easy to earn 4-6% rewards in form of cash back or miles when you are shopping, which is effectively a form of "discount" for the card holder. Given that a 5 tick air conditioner is about 20% more expensive than a 1 tick one, credit card rewards could offset nearly 25% of the price differential.

Furthermore, some credit cards have great 0% interest instalment payment plans that you can use to spread out your payment over a few months. While most of these plans tend to cost an upfront fee and exclude you from earning any credit card rewards on your purchase, some actually do offer 0% instalment plans with zero fee while also providing rebates and miles. If you do decide to use one of these cards and their payment plans, make sure to completely pay down your balance on time so that you don't incur high interest charges after your 0% interest grace period.

A Win-Win Situation

It's rare to find an opportunity where doing good for the world is also objectively good for oneself. Therefore, we were rather surprised to find that going green at home actually could be just such a "win-win" type of opportunity where you can help the environment while also helping your bank account over the long run. While paying a few hundred more dollars for an eco-friendly air conditioner or refrigerator may not sound appealing now, we hope that taking a long-term view while also smartly using credit cards can help everyone make a wiser long-term decision when it comes to furnishing their homes.

Duckju Kang

Duckju (DJ) is the founder and CEO of ValueChampion. He covers the financial services industry, consumer finance products, budgeting and investing. He previously worked at hedge funds such as Tiger Asia and Cadian Capital. He graduated from Yale University with a Bachelor of Arts degree in Economics with honors, Magna Cum Laude. His work has been featured on major international media such as CNBC, Bloomberg, CNN, the Straits Times, Today and more.

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