Buying a home is often seen as an important rite of passage to ‘adulthood’ and a major part of the American dream. Depending on your situation and where you live, it can also be cheaper than renting. But unless you have a large chunk of money just sitting around, the down payment it requires is a big obstacle. As higher costs of living continue to shrink our net income, it can be a real struggle to save that recommended 20%, especially if you’re a first-time homebuyer with few assets. Thankfully, there are plenty of assistance and low-down-payment options out there if you really need them. Here are some simple strategies for saving up for your first down payment.
1. Open a Dedicated Savings or Investment Account and Automate It
Separating your down payment fund from your other savings accounts will make it easier to calculate its progress. You can simply create a new savings account with your current bank for ease of transfer, but it’s also a good opportunity to open up a high-yield savings account online that may offer better interest rates than your bank. Money market accounts and funds are also low-risk ways to earn more for your dollar. If you have a year or more to save, CDs offer even higher interest rates. And with interest rates much higher than the past these days, your money will work much harder for you.
Next, set up your direct deposit or bank account to automatically transfer a certain amount from each paycheck (ideally based on your projected savings goal and timeframe – like a sinking fund). Even if you can’t afford to set aside much, consistency leads to accumulation.