How to Save up for a Deposit

If you are looking for a home, either to buy or to rent, you will need a deposit to put towards it. If you rent, the deposit is likely to be a good few months’ rent and if you are buying then it will usually be about 5% of the cost of the property. Buying will require significantly more money than renting. However, it can be equally tricky to save up for each, depending on what methods you plan to use. There are things you can do though, which will make saving up easier.

Set up a savings account

It is wise to start by setting up a savings account specifically to put your deposit money in. This will make sure that the money is kept separate and that you do not accidently spend it on something else by mistake. You will also be able to easily see how much the money you are saving up is going up or perhaps how slowly it is increasing. This could help you to know whether you need to work harder to get your deposit together more quickly.

Pay in regularly

It is wise to pay into your savings account regularly. If you set up a direct debit to go out on the day you are paid, then you will know that you have the money available to do this. Make sure that you set it up for an amount that will add to your deposit as much as you can afford without leaving you short of money when you need it to pay for other things. It can be tricky to get this just right if you guess, so you may have to look back over previous bank statements to work it out. Most people would rather wait until the end of the month and see what money they have left and just transfer that into their savings account. Although this is better than not saving at all, it is wise to do it at the beginning of the month as then you will be sure that there is some money there. If you leave it to the end then you may have spent it all. However, by transferring it early you will not have the money available to spend and you will have to budget more carefully.

Analyse Spending

It can be really useful to analyse the sorts of things that you are spending money on. We all have things that we have to pay for, but often we will buy lots of things that we do not really need. It can be fun to treat ourselves to all sorts of thigs or to pay a bit extra for things so that they are nicer. However, if you are saving up for something, then it is wise to not do this. If you can cut down here, then you should be able to free up a lot more money for paying towards the deposit.

Keep Motivated

If you are saving for a long time, then keeping motivated can be a problem. It is worth thinking about what you might be able to do to help yourself. It could be good to write down your goal and put it somewhere that you will look at every day so that you will be able to keep reminding yourself as to why you are doing this. It can also be useful to get others to help you and remind you. Perhaps if you are moving in with someone then you could work together on it.

So, although spending less and saving up would be the most obvious things that you need to do in order to save up a deposit, it is important to make sure that you are doing this effectively. Staying motivated is really important and if you set up a savings account and pay into it regularly, it can make the whole task a lot easier. Obviously, making sure that you change the way that you spend so that you have more money available is important as well. It can be a big effort with lots of changes required, but this will be worth it once you are able to get the home that you are aiming towards. It is also worth remembering that the more money you are able to save, the better a home you can get. With a rental you need to be careful as you do need to make sure that you will be able to afford the rental each month. With a mortgage, if you are able to save up a bigger chunk of money, it means that you will either be able to get a more expensive property or you will be able to pay off a bigger chunk of the property and therefore get a lower mortgage.