When you finally decide that you want a place of your own there is one big savings goal you need to have achieved – the down payment for your first home. Depending on where you live, down payments can range from 3%, to 5% and much higher. This means that you have to start saving money before you can get a place of your own. To make sure you’re set up for success, here is a list of tips that will help you save for a down payment on your first home.
Determine how much you need to save.
This should be your starting point, if you need to have a minimum of 3%, 5%, or more, you need to know how much you need to have saved up before you start shopping for your first home. The best way to do that is to start with an online calculator.
Open up a separate savings account
It will be very tempting to keep all your money in one account and just do the math in your head. This won’t work. You need to keep your down payment separate from all your other money because when it’s all lumped together there’s a better chance that you will spend it on other things.
When you keep your downpayment money separate you can watch it grow, and you are less likely to touch it when the inevitable unexpected expenses come up.
With this separate savings account, you can give it a purpose “House Down payment” and start putting money into it right away and an on ongoing basis. The best thing you can do is make this account easy to get set up, but hard to take money out of quickly.
Start saving some money every time you get paid
If you are serious about saving up for your down payment then you need to make sure that money gets put into savings before you ever touch it. Some workplaces will do this for you. The best way to start saving up is to decide on a minimum amount you will put away every pay-check and make it happen.
Make Your Savings Automatic
It’s a good idea to set up an automatic transfer from your main account to your down payment savings account. This takes the pressure off you to remember to do it every payday. Just set it up once and let it happen automatically after that, then watch your savings grow!
Let’s face it, there will always be a reason not to save that money. By setting up an automatic transfer you have a much better chance of not using that money for something else.
Don’t Touch Your Downpayment
From the day you open your separate savings account, make it a rule that you will never touch the money in that account. Pretend like it’s disappeared from your life and the only way you will see it again is when you are buying your first home. This rule is a must for saving up for your down payment. Without this you will be tempted to use it for other things and this will hurt your down payment, or worse wipe it out altogether!
Make Your Saving Visual
It’s best to keep your goals in front of you. This will help keep you motivated. When we were saving up for our down payment we had a work sheet and kept at it until we reached our goal. If you would like access to the saving plan we used to save for our first home, simply enter in your email in the box below and download our down payment worksheet.