Saving money is increasingly difficult, especially with the rise of the cost of living. Saving for a deposit for your first home may seem like an unobtainable dream. However, you can purchase your first home, should you make cutbacks and ensure that you are savvy with your cash. If you are serious about saving for a deposit for your home, you need to follow this simple four step guide:
Step One – Name your goal
This part is simple, ask yourself what you are saving for? Of course, it is a deposit on your new home. However, it is bigger than that, try and establish an emotional connection with your goal. Ultimately your goal will be a financial one, so think of a realistic amount and write it down. If you name your goal, you should be able to reach it faster than those who do not.
Step Two – Work out how much to save each month
In step one, you should have written down a realistic and achievable sum. It is now time for you to work out how much of your income you can afford to save each month, or week, and an appropriate timeline in which you would like to reach your goal. For example, if you want to save $5,000 and you have a surplus amount of $500 at the end of each month you could choose to save all of the surplus money and reach your goal in 10 months. However, you can also choose to save $250 each month meaning that you will reach your goal in 20 months.
How much you save is completely up to you. It is a choice you should think carefully about. You should try to strike a healthy balance with the savings amount and affordability. Help is at hand for those who want it, as companies like Homestart WA can provide financial assistance if you cannot realistically afford to save for a deposit.
Step Three – Set up a standing order
Now you can get your savings started by setting up a standing order from your account into a savings account. Try and give your account, or payment reference, an inspirational name, as this should help you keep to your original goal as outlined in step one.
If you do not have a savings account set up, now is the time to do so. Just open an instant access savings account with the same bank your current account is already set up with. This should make payments to your savings account much easier and more timely.
Step 4 – Shop around to find the best place for your savings
Instant access savings accounts are varied, so it is essential that you take the time to find out which type of account is going to be best for your money. You want your money to grow as quickly as possible, so it is imperative that you find your money the right home.
For savings that will take up to five years, you should be looking into products such as cash ISAs, savings accounts or term deposits. If your savings will last between five and ten years, then you may want to consider an investment product. Do bear in mind that you should look at any potential risks involved.
For a longer term saving goal, you should consider investment products such as shares or bonds that will provide your savings with protection against long term inflation.