So-called “helpful hints” on how to save money for a deposit are just so… depressing.
“Skip your daily cappuccino, cut your own hair, tent in your parents’ backyard…” Why not just get a straw and suck all the fun out of your life?
There’s no doubt that saving for a deposit is not easy.
Recent statistics show that on average it’s taking borrowers in Sydney six years to save the necessary deposit – up from five years in 2009. Nationally, the figure is 4.5 years (up from 3.7 years in the 12 months before).
There are a couple reasons why it’s getting harder – house prices are going up and the government boost to the first homeowners grants has gone down.
Research from the Queensland University of Technology also shows that saving for a deposit is a lower priority for the current generation of students, with almost 62% stating that they would put overseas travel ahead of saving for a house.
It appears a significant portion of borrowers are counting on 100% loans to get them into the market. Loan Market, a national mortgage company, reported almost 25% of the enquiries in January were from people seeking 100% loans.
But increased lending restrictions require genuine savings contributions of around 5% towards the property purchase – which means borrowers without savings will be forced to come up with a deposit.
The good news is saving for a deposit doesn’t have to suck your will to live.
First off, you’ll have to do a personal audit. “Audit” doesn’t have to be a dirty word. In fact, it has the same number of letter as “party”. See? For a month, write down everything you spend your money on. Put it all in there - cappuccinos, cable, car washes. The point is not to make you feel guilty for how you spend your money, but rather to give you an indication of which areas could be cut more painlessly.
For instance, if you spend four out of five weeknights at the gym, then maybe you don’t need the total TV package. Or if you like to go out to dinner, buy an Entertainment book. Want to still socialize with friends? Take turns hosting dinner parties. Maybe you shop online – look for discount codes before you checkout. You like to read? Check out the library – it has much more than just books. Need a vacation? Check out places where your dollar will go a lot further.
The second thing is to pay yourself first. Before the bills, the haircuts, the coffees – set aside the money you intend to save as soon as you get paid. If you wait until the end of the month to see what’s left, there often isn’t anything.
Next - get a great savings account. There are quite a few options at the moment. Some are online accounts, some have great introductory rates and some offer high rates for making a term deposit. The best choice for you will take some research and depend on your own level of discipline. In terms of savings accounts, UBank’s USaver account is offering a base rate of 6.01%, with a bonus 0.50% with a savings plan, while Virgin Money is offering a 6.51% rate for its Virgin Saver account (introductory rate for four months). Or there’s the Citibank Online Saver account, which gives customers 6.45% variable intro rate for six months on balances up to $2m.
Another savings option is the Government’s First Home Saver Accounts. These accounts combine government contributions and low taxes, making them excellent vehicles to save up for a home deposit. Provided you’re over 18 and under 65, you’ve never purchased a home or built a home before, it’s your first-time using the account and you have a tax file number – then you’re eligible to apply. The Government contributes 17% on the first $5,000 of individual contributions made each year. For full details visit www.homesaver.treasury.gov.au.
Another painless way to save for a deposit is to look for additional sources of money. Maybe you could be earning more at your job? When was the last time you received a pay increase? Is there a promotion coming up that you could apply for? Or maybe it’s time to make a switch. It never hurts to see what else is out there. But the important thing to remember is when you do start making more money, you need to stuff the additional wage increases into your savings account.
There are plenty of other opportunities to make more money simply by looking around your place. That surfboard gathering dust in the corner, the guitar you never really play, all those maternity clothes that you never plan on wearing again – these are big sellers on eBay and Gumtree.
And last but not least, consider your parents. Don’t feel too bad – you’re not alone. A survey of Loan Market brokers found more than half of the respondents – 56% - believe family pledges and gifts has become the fastest growing method of acquiring a deposit.
