5 Simple Top Tips For Saving For A Deposit
Buying your first home isn’t as attainable as it used to be, with prices soaring and costs of living accelerating alongside, finding the cash to save for a deposit can feel like a pointless endeavour. But putting money to one side and finding a few pounds to save each month can stack up, and having a long-term approach to saving for a deposit will put you in a better position in the future.
There isn’t much of a quick fix when buying your first home, but bear in mind that opening up a long-term saving account now will be the first step to success when you spot your dream home.
If you’re wondering where you’re going to find chunks of cash to save, don’t worry. MoneyBright’s expert team have compiled five straightforward ways you can save for a deposit. Don’t worry though! We’re not going to tell you to stop buying your morning flat white or cut back on avocados. We know that young people are not at fault for the difficult housing market and tough costs of living, and you should be able to enjoy life’s simple pleasures in the meantime.
Instead, we have real and actionable tips and tricks on how to save money in a more sustainable and realistic way. Take some inspiration from them and watch the pennies pile up into pounds…
1. Set a goal
There’s no point in mindlessly saving money each month. Having little to no motivation can make it difficult to save for a deposit, as purchases that hold more instant gratification can end up taking priority at the moment.
Instead, having goals set up will act as a continuous reminder as to what you’re working towards. Of course, saving for a deposit is a tough task when you buy a property, it can be quite a drawn-out process, so this isn’t always a great goal to strive for.
Instead, set mini-goals throughout the time it takes you to reach the overall goal of having enough money to buy your first home. We suggest setting saving goals that are time-sensitive and for specific amounts of money. Have a reward planned for when you reach each saving goal for an extra dose of motivation.
2. 50/30/20 rule
For some everyday spending guidance, MoneyBright recommends the 50/30/20 rule to help you save for a deposit. The rule is designed to help you to manage your money whilst focusing on a simple way to save money, boost your savings and in this instance, help you to buy a property.
The rule requires you to allocate 50% of your income for your needs, 30% of your income for your wants and 20% of your income for savings.
What constitutes a need in your day to day life can vary depending on where you live, work and other factors. But these are usually things that are ‘must-haves’ such as rent payments, car payments, utilities, groceries, insurance policies, health care, and travel.
The wants are usually things that you like to spend money on that aren’t absolutely essential. This can include things like dining out, new clothes, going to events and memberships or subscriptions.
We don’t recommend skipping out on spending your money on these things. Saving for your first home is important, but if you restrict your spending too much, you might end up splurging on something expensive out of frustration
Finally, the most important part of the 50/30/20 rule is the savings section. Allocating 20% of your income to saving for a deposit will boost your savings exponentially, improving your chances of being able to buy a property. We recommend setting up a standing order to your savings account or a separate ‘pot’ on your banking service so that you don’t feel tempted to spend the 20%.
3. Saving challenges
Let’s be honest, saving money can feel like a bit of a chore. Especially when you want to be able to enjoy the fruits of your labour as soon as possible.
Saving challenges can offer a different way to save for a deposit, making it feel more like a fun task rather than a difficult and long expedition. There are plenty of saving challenges out there that you can give a go if you feel like you need to reinvigorate your interest in saving money.
We personally love the 12-month challenge, in which you use each month of the year as a number to guide your savings. Each month has a number, and you multiply this number by ten to get the sum you must put in your savings account.
We recommend doing this in a bit more of a simple way, allocating January as £10, February as £20 and March as £30 until the year is up. By the end of the year, you’ll have saved £780! That’s nothing to sniff at.
4. 24-hour rule
Impulsive and badly thought through purchases can jeopardise your efforts when saving for a deposit.
If you want to buy a property and you need to control your overall outgoings, try the 24-hour rule. It’s as simple as it sounds and requires you to wait 24 hours before going through with any purchase that hasn’t been planned or is over £10.
Of course, we’re not talking about a quick pit stop for a drink and a snack. This rule applies to the purchases that don’t really slot into your everyday spending habits, such as new clothes, a tech upgrade or a holiday.
5. Make use of your LISA!
The government offers the fantastic tax-free savings account for anyone under the age of 40 to use to save for a deposit. It’s an incredibly valuable asset to you when you’re looking to save money to buy a property and can provide a boost in your savings that you’ll struggle to find elsewhere.
Perfect for first-time buyers, the lifetime ISA allows you to deposit up to £4,000 each tax year and any money saved with receiving a 25% government bonus top-up. That’s an extra grand that you can save, completely free!
This bonus is added to your LISA every month, so you’ll be able to see those numbers climb as you put money into it, making all that more satisfying.
Want to find out more about LISAs? Check out the government’s explanation for all the details!
Ready to start saving for a deposit?
There are many more ways to save money, whether you’re saving for a deposit on your first house or you want to create an emergency fund for peace of mind. You can put cash away even if you’re on the tightest budget with MoneyBright’s expert tips, tricks and guidance.
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