Saving for a home loan is no easy feat, so we’ve compiled some tips and advice you help you grow your bank balance even faster.
Before you start squirreling away your pennies, you need to set a specific goal, says ING DIRECT. “Saving is easier when you have a goal in mind. It keeps you motivated and helps you to stay on track,” they suggest.
If your goal is to save for a house deposit, then you need to work out how much you want to save ($20,000), what timeframe you need to save it within (two years), and how you can reach your goal more quickly.
The idea of saving $20,000 for a home loan deposit may seem too big to tackle, so start with a small goal – say, saving $1,000 – and once you've achieved that, you'll be well on your way to reaching your bigger target.
Here are some ways you can fast-track the process of savings towards buying your own home:
1. Open a high-interest savings account
Keep your funds flexible in a high-interest savings account; term deposits may offer slightly higher interest rates, but your money is locked away for a set period. Almost every bank offers these types of accounts with compounding interest rates, which will help you to reach your goal sooner.
2. Bank your tax return
If the tax man is prepared to give you a refund, consider banking it, or at least half of it, in your savings account. If you deposit $1,500 from your tax return into a high-interest savings account two years in a row, you’ll savearound $3,300, which takes care of almost 20% of your $20,000 goal.
3. Quit the gym
Unless you’re taking proper advantage by visiting the gym at least 2-3 times a week, consider cancelling your gym membership and funnelling those funds towards your home ownership dream. Take up walking or jogging instead and repurpose that $25 a week to your savings account: in two year’s time, with compounding interest, you’ll have accrued almost $3,000. If you don’t have a gym membership, look for other opportunities to trim your monthly budget.
4. Review your insurance policies
“Take a look at the multitude of insurance policies you hold – you can make some significant savings with just a few small changes to your home, car, mortgage protection or landlord insurance,” advises ING Direct. Many insurers will price match or better still, beat their competitors by 5-10% if you’re able to prove a cheaper premium elsewhere. Whatever savings you make, be sure to bank them; even if it’s only $10 a month, your home deposit will grow more quickly if you transfer that $10 to your savings account, rather than absorbing it into your every day spending.
5. Don’t negotiate on your savings plan
One of the most effective ways to save is to transfer 10% to your savings account from your pay packet each month, and then pretend it doesn’t exist. If you can manage to set aside $350 a month, within two years time you’ll have almost half of your $20,000 deposit saved.