Saving your first home deposit can be extremely daunting. Getting 10-20% of the purchase price together can seem like a lifetime away if you are only just starting your journey towards home ownership. The key thing is making a start though. Others like you have got themselves on the property ladder by committing to a savings plan and sticking to it.
This post will take you through 5 tips on how to make the process of saving your first home deposit as quickly as possible.
Disclaimer: While this post contains financial suggestions, we are not qualified to provide financial advice and we strongly recommend you seek proper advice before making any big decisions with your hard earned wedge. This info is sourced from personal experience and is designed to help you with ideas that can assist you in reaching your goals faster.
Tip 1. If you suck at saving – consider upping your KiwiSaver contribution.
Did you know you can choose to contribute up to 8% of your income into your KiwiSaver fund? This is a great way to force yourself into saving more. It is so much easier to stick to a savings commitment if the money is put away before you have access to it. The best part is you can use your KiwiSaver fund as part of your first home deposit – please check with your mortgage broker to make sure you are eligible for this before upping your contributions though!
Have you been living under a rock and somehow not enrolled yourself in KiwiSaver already?
Click here for more info on how to join…
Tip 2. Review your KiwiSaver provider.
Not all providers are created equal. In fact the difference in performance returns is huge! Choosing the right provider could have made you an extra 10% on your money over the last 3 years. Click here to visit sorted.org.nz and use their fund finder tool to find the right option for you:
The scary thing is – most people I talk to can’t even tell me off the top of their head who their fund is with. Personally I am enrolled with Fisher Funds Growth Fund
MARCH 2019 UPDATE: I have now switched to Simplicity KiwiSaver, specifically their growth fund.
Please note: Past performance is no guarantee of future success. But what else can you go by?
Tip 3: Use ASB’s save the change service.
While I don’t personally use this service I think the idea is brilliant. ASB automatically rounds up the amount of each purchase you make using eftpos by a factor you nominate and transfers the difference into your savings account. For instance, you can nominate to round up to the nearest $1, $2, $5, or $10. What a fantastic idea. Every little bit counts people!
Tip 4: Pay down higher interest rate debt first.
When you commit to a savings plan it is tempting to start putting money into your savings account straight away. However, it is crazy to have money in a savings account earning you 1 or 2% per year while you still have credit card or personal debt costing you 15 – 20% per annum. It is imperative you pay down this debt first and immediately stop it from building up again. If you can’t afford to pay off your credit card every month then you really need to cancel it if you are serious about saving.
Tip 5: Set goals.
It’s easy to say “I want to buy a house” or “I want to save up and go overseas” but committing to it and sticking to a savings plan is the hard part. Setting goals and supporting each other in your new found frugal lifestyle is the key. Figure out a reasonable amount you can afford to save each week and take it out of your account the moment you get paid. Transfer it to a savings account that you don’t have easy access to. Don’t over commit as well – there is no point starving yourself and not going out because you are saving every penny, stick to a realistic amount and you are more likely to keep the habit going long term. You also need to keep some money available for emergencies that inevitably come up in day to day life.
Be patient. When you start a savings plan it is easy to get depressed and think “it’s going to take me 2 years to save what I need!”. But the thing is, time just fly’s by before you know it. When you have a goal it’s funny how things can work out in your favour too – you might get a raise at work in the meantime, you might inherit money or be gifted money from relatives who notice how committed you are.
You never know what is just around the corner.