Home Property How to Save up for a Deposit

How to Save up for a Deposit

by James McGregor

If you want to rent a home or buy one, you will need to save up for a deposit. On a rental home the deposit will cover any damage done to the property and will be repaid once you move out, as long as you leave it in good condition. It is usually repaid after you move into your next home, so you need to find a deposit every time you move. With a mortgage you will need to secure a payment against the home. This will usually be significantly more money than you would have to pay for a rental and therefore it will take longer to save up. Either way, you will need to think about the ways that you can save up money so that you will be able to afford to pay that deposit.

Savings Account

It is a good idea to open a savings account to put the money in. Have one specifically to put the deposit in and this will allow you to know that you cannot touch that money as you are keeping it for the deposit. It is good to search around for one with a good interest rate, even a small difference in rates can make a big difference to the interest you get so it is good to check. You may find that an account where you give notice for withdrawals will pay more interest and as you will not need the money for a while, it is good to consider one of these. If you want an instant access account, then still compare them as although rates are low at the moment, the are varied. A comparison website could help you to find one. Check rates regularly as better ones may come along and it could be worth moving your money.

Pay Yourself First

When you get paid make sure that you immediately put some money in the savings account. If the money is not available for you to spend, then you will not be able to buy other things with it. We will often see that we have money and then allocate it to spend on various things, but if it is not there then we will not be able to do that. Of course, you will need to make sure that you have enough left to pay for everything you need, to cover your bills, food etc, so you will need to carefully calculate the amount that you pay into the account each month. Do be sure though, to also pay in any extra money you get and any you have left at the end of the month in order to grow those savings as quickly as possible. Some people just wait until the end of the month and save what is left the day before they get paid. Sadly, doing it this way means that there is often nothing left. We check our account balance and see there is money there and then we spend it, but if some has been removed and put in a savings account it is not there to spend and so we should save more than if we wait to see what is left.

Reduce Spending

It might be possible that you will be able to reduce the amount that you are spending in order to be able to save more. There will be things that you have to pay for, but you will also find that you will be able to cut back in some areas as well. There are lots of things that we buy that are not necessary that we might feel we can give up in order to save more money. Things like subscriptions, gym memberships, eating out, daily coffees, clothes and accessories, luxury food and drink etc. All of these items are extra to what we need and we might be able to give all or some up to help. Some people will buy more of these than others, but it is worth examining what you are spending really carefully so that you will be able to identify areas that you can cut back. It can be useful to look at past statements or note down what you are spending so you are more aware of where your money is going and this will help you to be able to carefully decide whether there are areas where you can cut back. Some people will be able to cut back more than others, but hopefully you will find some areas to cut back so that you can at least save a little bit each month.

Increase Income

Increasing your income will allow you to have more money to save. If you do decide to find ways to do this, it is a good idea to make sure that you do save the money and do not get tempted to spend it on things that you do not really need. Think about ways you can get more. It is possible that you may be able to do more hours in your job or ask for a pay rise but this is often not an option for many people. Therefore, you may need to be a bit more inventive with your ideas. You could consider selling things that you no longer need or use. Although this will not give you an income, it will provide a lump sum of money that you can add to your savings. You could start up a side hustle to earn some money, perhaps monetising a hobby that you already have. This will not be easy and could take up a lot of time, but it will allow you to be able to get an income stream, which could not only help now when you are saving, but will also help with paying your rent or mortgage. A second job could be an easier option for some people but others may prefer to try something at home.

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