Are you planning to buy a dream home? This is certainly a big decision for a family that demands a hefty investment. Some families struggle with how to save for a house. We can’t deny that owning a home you call your happy place is a luxury, but saving for a down payment can be is challenging.
Although you have plenty of housing loan options, you still need sufficient money for a down payment. A down payment can be 15-20 percent of the home price. Also, there are additional expenses, such as homeowner insurance, property taxes, closing fees, etc.
According to finance experts, the best way to save enough money is to start early. Also, you need to have multiple savings accounts to finance this big purchase. Here are five tips about how to save for a house.
Abide by the 50-30-20 Rule
Develop good money management skills by adopting the 50-30-20 rule while planning your monthly budget. Out of your total take-home pay, set aside 50 percent of your income for fixed costs, 30 percent for unexpected expenses, and 20 percent for savings.
A proper plan and disciplined financial habits will motivate you to cut down unnecessary expenses. Also, when you move into your new house, all the efforts and budget adjustments will be worth it.
Save in a High-yield Savings Account
When it comes to saving money for a specific life goal, savings accounts are the preferred and best option. You can choose from several types of savings accounts but a regular one offers a lower rate of interest and inadequate returns.
That is why financial experts recommend high-yielding savings accounts that provide a higher interest rate than other usual savings accounts. Set up automatic deposits to your high-yield savings account, and you’ll have your down payment in no time.
Invest in Mutual Fund SIPs
No matter how well you plan and focus on creating a monthly budget, the harsh truth is it’s hard to evade some expenses. These unexpected and inevitable purchases can take a toll on your dream of buying a house.
You can avoid this through a systematic investment plan (SIP) where you can invest a specific amount regularly in a mutual fund. It allows you to start with a minimum investment that you can afford. This develops a habit of investing consistently despite market fluctuations.
Invest in Profitable Financial Instruments
If you want to accumulate a certain amount of wealth in the next 10 years, then you must invest in different beneficial financial instruments. Saving the right way and in the right growth scheme can help you earn enough at a decent rate in a given period.
Of all the available options, you can choose to invest in mutual funds or index funds, or fixed deposits (FDs). They are the most secure ways to generate income over the years. Mutual funds can offer 9-15% annual returns but may involve high fees. Index funds can provide approximately 7% interest rates or more and allow you to invest in several companies simultaneously.
Open Multiple Savings Accounts
A savings account can keep your money secure while paying you high interest annually. Thus, increasing your savings over time. To grow your balance and seek the benefits of multiple savings accounts, open the right number of accounts. However, having several bank accounts requires systematic management. Make sure that none of your accounts are inactive for a long period of time.
What other tips do you have to help folks save for a house? We’d love to hear your thoughts in the comments.
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