The average first home buyer’s loan in Australia is over $315,000 which means to save for a 20% deposit sometime in the next decade you may need to put away a few hundred dollars a month. Savings accounts are still the most popular way for Aussies to save money but with interest rates at historically low levels the returns can look pretty meagre.
But couples can pool funds to take advantage of higher interest on bigger deposits. They can also motivate each other to stick to a savings plan. Aussie look at ways to save together that could help you get that elusive deposit sooner.
The way some pundits see it, potential first home buyers are too busy scoffing smashed avo for breakfast to save up for a deposit, and rates of home ownership among Aussies aged 18 to 36 are among some of the lowest in the world.
Despite that, home ownership is still a top priority for most young Aussies, with over 80% of respondents in a recent HSBC survey saying they intend to buy in the next five years.
Even in a couple getting enough cash together for a deposit is the biggest obstacle, but there are some useful strategies for saving that can help you get there quicker.
Together you get more bang for your buck
A lot of banks and financial institutions offer higher rates of interest on savings accounts when regular deposits are above a certain amount. So there’s potential to more than double the interest you earn when you double the amount you deposit.
Setting up a joint savings account as a couple can be a good way to start a savings fund together. You’ve got the option to set up either an account that needs both signatures to approve transactions, or an account where only one signature is needed for approval.
Unless you really need flexibility to access funds at short notice an account where you both need to sign means you’re less likely to withdraw funds without a good reason.
Make it a joint (account) effort
Successful saving is about more than just taking advantage of better interest rates from a joint account. It also means finding strategies to save extra cash, and staying motivated while you work towards your goal.
As a couple you can work together on strategies and help each other stick to them. And while you might not have to give up the smashed avo completely, cutting it back to once a month could be one of those strategies.
Here are a few other tips and tricks you can use to kick off a joint savings plan:
• Set a joint goal, nominate an amount and pick a time frame. Sticking to a specific goal is easier than chasing a vague notion of ‘saving for a deposit’.
• Look at your spending habits and identify areas where you could cut back together. Review joint leisure activities such as eating out and come up with cheaper alternatives. Date night at home can still be romantic.
• Where possible, consolidate some of your spending such as your mobile phone. These days Telco’s offer shared data plans that could save you money.
• Go on cheaper holidays, or take less of them. Stick to low season and take advantage of discount prices when resorts are quiet.
• Be realistic about each other’s personal spending. You don’t need to give up your gym membership or the occasional night out with the boys or girls … set a monthly budget for individual things.
• Birthdays, Valentine’s Day, the anniversary of the day you met, first kissed, or got married can all cost money if you celebrate every occasion with a gift. Agree to put extra cash into your account instead, it will soon mount up.
Saving is a habit and although it varies, expect it to take at least a couple of months before it’s an established one. Learn to question all discretionary spending; there’s probably always a cheaper alternative. And set up a few routines that prompt you both to check regularly to see how you’re tracking.
Tricks to keep each other on track
The thrill of realising that you might actually be able to save for a deposit can soon fade when the reality of less spending sets in. Stay motivated by checking in on your goal regularly, here’s a few tips to keep you on track:• Write it down. There’s nothing like a visual reminder of progress to keep you motivated. Set a plan for how much you want to save each month and then fill in the actuals when you get there.
• Write it down. There’s nothing like a visual reminder of progress to keep you motivated. Set a plan for how much you want to save each month and then fill in the actuals when you get there.
• Set up a direct debit so the cash is automatically transferred into your savings account before you get your hands on it.
• Set penalties for any spending that falls outside your budget, and set small rewards for reaching and exceeding goals.
• Have a financial date night. Sit down together regularly, whether it’s once a week or once a month, and review your progress together. Discuss any difficulties you have sticking to the plan, or if it’s all too easy think about setting a bigger goal.
Before you begin a savings plan it’s a good idea to pay off any credit card debt. If possible limit yourself to one credit card for day-to-day spending, and make sure you pay the bill in full every month.
For the majority of savers getting enough cash together for a deposit won’t happen overnight. It probably won’t happen this year. But it can happen. The trick is to make saving as much a part of your lifestyle as sessions at the gym and catching up with friends.
You can start talking to your Aussie broker today about the right home loan for you, and get saving now to turn it into a reality sooner.
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