Saving For A House? 4 Ways To Kickstarts Your Deposit Fund

Saving for a new home is one of the most challenging financial projects any of us ever undertake. And it only gets harder, the longer we stay out of the market. Renting costs about $2,000 a year more than paying a mortgage. And house prices are going up every year, making deposits even more expensive. So for many families, it’s a race against time to save for a deposit and get on the housing ladder.

High Interest Savings Account

One of the best places to put your money is into a high-interest savings account. In some countries, you’re not taxed on the interest you earn from money in your savings account. For instance, in the UK, Brits no longer pay 20 percent capital gains on savings in their ISAs below the £15,000 threshold. In other countries, like Australia, savings interest is still subject to tax. But it’s a still a much better way of building up money than keeping money in a current account.

In Australia, savings accounts are overseen by the Australian Prudential Regulation Authority. So if you’re unsure about any savings account offers you see, check with them first.

Budget Cutting

If you’re a first home buyer in Sydney, it takes eight years to save for a 20 percent deposit on a medium sized house. That’s $200,000. In Melbourne, it’s 5.8 years. In Brisbane and Canberra, it’s 4.1 years.

These are obviously substantial sums of money. And so most families have to cut their spending back to the bone to afford a house. So what are families doing to save? First off, they’re cutting out unhealthy habits. A typical cigarette habit costs the average person about $2,600 per year. Over the course of 8 years, that’s $20,800, or about 10 percent of the deposit price. Second, they’re cutting back on meals eaten outside of the house. Meals outside of the house are most household’s biggest entertainment expense. And so cutting these out helps to control unnecessary bills. Food can be just as delicious if cooked in the home.

Finally, we’re seeing a trend towards using smaller, more fuel-efficient cars. Gas-guzzling cars today are an unnecessary expense that can push back a house-buying date. Many people are now using apps like TrackMySPEND to find out where they’re going wrong.

Move Back Into Family Home

Today’s housing market is so distorted that practically nobody can afford a home without taking drastic action. One such measure is to go back into the family home temporarily. This provides so much needed relief from private rents. And it could save the average renter more than $11,000 per year.

But it’s not just rent where savings can be made. When everybody lives together, it also means lower average bills and other costs.

Cut Out Foreign Holidays

It’s not a good idea to cut holidays entirely out of your schedule. But staying at home and avoiding costly air fares is certainly a good way to reduce your expenses. Right now, the average family spend for a foreign holiday is hovering around $4000.