To first-home buyers everywhere: fear not. Saving for a house deposit doesn’t have to induce a quarter-life crisis, although it’s completely understandable if the very thought of the property market in Sydney enough to give you a migraine. It’s no secret that house prices in our major cities are excessive and coming up with the funds for the initial house deposit (a minimum 20% of the total value of the property you’re eyeing) can seem daunting.
That being said, saving for a house deposit is entirely feasible. It will require some strategising and a re-assessment of your current living habits, but that doesn’t mean you have to resort to eating instant noodles (or canned beans) for an entire year.
Here are 9 money hacks to help you save for a house deposit:
1. Set up a high-interest savings account
You might swear by the Big Four, but doing your research and choosing an alternate bank may give you a better return due to competitive interest rates. That’s why we recommend setting up a separate high-interest savings account for your house deposit. Here are some top contenders that don’t involve monthly fees (rates are as of June 2020):
- Greater Bank Life Saver – ongoing 2.0% p.a. for under 25-year-olds living in NSW when you make a monthly deposit of any value and no withdrawals
- Suncorp Growth Saver – ongoing 1.75% p.a. when you grow your net balance by at least $200 per month and make no more than one withdrawal per month
- Macquarie Savings Account – 2.26% p.a. and then 1.35% p.a. after the first four months
- AMP Saver Account – 2.20% p.a. and then 1.05% p.a. after the first six months
- Rabobank High Interest Savings Account – 2.25% p.a. and then 0.80% p.a. after the first four months
- Citibank Online Saver – 2.05% p.a. and then 0.35% p.a. after the first four months
- HSBC Serious Saver Account – 2.10% p.a. and then 0.15 p.a. after the first four months
Once you’ve set up a high-interest savings account for your house deposit, keep a close eye on it and ensure you’re actively investing in it. Consider transferring a significant amount of your income into your savings account each time you get paid rather than using up the bulk of your pay every month and then saving the sad leftovers. Remember the golden rule: Save first, spend later.
2. Befriend a spending tracker app
We’re living in the age of smartphones, so let’s start acting like it! There’s an app for just about anything these days and tracking your savings has never been easier. Gone are the days of confusing Excel spreadsheets and dreary budget planners (unless that’s what you prefer, then more power to you).
Using a spending tracker app really helps the saving process along. Apps like EveryDollar, Wally and YNAB are (mostly) free and allow you to create realistic budgets and visualise your expenses so you can figure out where most of your income disappears. Some apps like Mint, PocketBook and Spendee also sync with your bank accounts, conveniently aggregating and categorising your expenses whilst serving as your personal budget planner.
3. Ditch small spending habits
Once you’ve linked up with a spending tracker app, reflect on your daily spending. Do you really need that overpriced takeaway coffee or late-night food delivery from the pizza place ‘round the block? It might not seem like a lot of money at first, but those expenses can snowball, especially when they’re the heart of your ‘small’ spending habits. Think about it: If you’re drinking a $4 cup of coffee per day, that ends up costing you $28 a week or $1456 a year – money you could have saved for a house deposit.
- What are some of my non-essential spending habits?
- Are there any transactions that don’t align with my values or needs?
- How can I address these spending habits and make effective changes to my lifestyle?
Ditching these small spending habits can make a huge difference to your savings. All it takes is re-evaluating your priorities and a willingness to adapt and make effective adjustments to your current lifestyle. For instance, instead of buying coffee every day, you could invest in a coffee machine and bring your coffee from home in a keep cup. Instead of relying on takeout and/or eating out, you could learn to meal prep and cook dinners that aren’t boring. Instead of rushing to work in an Uber, you could learn to better manage your time and leave the house earlier.
Reviewing your spending is key and it’s also a good way to guilt-trip yourself into financial prudence.
4. Be smart about your groceries
How many times have you looked at your grocery shopping receipt with disbelief? Let’s face it: One trip to Woolies and Coles can really undermine the entire saving process, especially when you’re not diligently following a pre-prepared shopping list.
To shop smart and cash in on those savings for your house deposit, we recommend doing your grocery shopping at night, where you’ll likely find last-minute sales. Take a shopping list with you so that you aren’t tempted by any unnecessary items (truffle oil chips, anyone?) and consider buying your household essentials and kitchen staples at Aldi or Costco instead, where it’s so much cheaper. Regardless of how you feel about brands, you can’t deny that going generic can really make a difference to your expenses in the long term.
You might also want to hop online to check out any weekly specials that you can grab in-store. We recommend optimising your grocery savings by being organised and planning about three to four meals for the week, shop for the ingredients and cook in bulk so you have enough leftovers to sustain you for the week.
5. Be online shopping savvy
When in doubt, hunt for discount codes. Most major online retailers will have one or they’ll at least offer a welcome code if you sign up for their mailing list. If you’re more old school and prefer buying items in-store, always check online before doing so as in some cases, the same item will be on sale online whilst not being on sale in-store.
For students, take advantage of sites like UNiDAYS, which partner with popular clothing, beauty, lifestyle and technology brands to tempt you with constant discounts. If you’re looking for a sneakier hack, you could try leaving a coveted item in your cart for 24 hours as the retailer might send you a discount code to seal the deal.
6. Op shop ‘til you drop
No, we don’t mean the curated and often overpriced vintage stores in Newtown and Surry Hills. Smart op-shopping is all about hunting for the bargain, whether that be for pre-loved brand-name clothes that are a fraction of their RRP, smartphones or tablets, kitchen essentials or cute household décor or furniture. Often, you’ll find that the items are so much cheaper and have been barely used anyway, so why the stigma? You’re shopping smart whilst making eco-friendly consumer choices that will help you cut down on costs and save for a house deposit. What’s not to love?
7. Get side hustlin’
If you’re struggling with income, but still determined to save for a house deposit, you should consider creating a second source of income. This could mean cashing in on your old junk on Gumtree, Facebook Marketplace or eBay, generating some extra income as a driver for a rideshare app like Uber or Ola, or turning a hobby you’re good at into a freelance side hustle.
If you have a spare room and you happen to live close to the CBD, consider renting it out or listing it on Airbnb. You’ll find that you can earn more than $100 a night as long as you’re prepared to do the work!
8. Downgrade your car
Having to deal with car expenses can be a burden for any aspiring homeowner saving for a house deposit. It doesn’t help either that they’re a depreciating asset. If it’s feasible for you, it might make a huge difference to your savings to sell your car in favour of a cheaper vehicle or a scooter/bike, which is way better for you in the long run, anyway. If you have access to public transport, use it wherever possible and get those savings in!
9. Rethink your housing costs
This one might sound a bit radical, but if you’re feeling the pinch from renting, you could save hundreds of dollars each month if you moved back in with your family – provided that Mum and Dad haven’t gotten too comfortable with the empty nest. The money you’ll save can be deposited into a high-interest savings account, which will get you much closer to saving for a house deposit. If this doesn’t sound feasible, consider recruiting a housemate so you can both reduce your housing costs. It’s a win-win.
Looking for more tips on buying property as a first-home buyer? Check out our take on what to do before buying your first home and how to make the most of property viewings. We’ve also partnered with uno home loans to bring you expert advice on what to look for in your first property.