5 Ways To Accelerate Savings For A House Deposit

The road to saving enough money for a house deposit can seem very long - but it doesn’t have to be. Even while paying rent, amenity bills, and other general day-to-day amenities, there are ways to speed up the journey to saving for a deposit; from creating a budget and cutting down on minor costs to looking at growing your investment portfolio.

We’re not here to provide direct financial advice; but in this article, we provide five tips to help accelerate your savings for a deposit.

How to Accelerate Savings for a House Deposit

1. Create a budget  

The first step in saving for a deposit faster is to create a budget. A budget will clarify how much money you are earning and spending, and highlight areas where you can reduce spending. To create a budget, record how much money is coming in, when money is coming in, and add up your expenses.

From this, divide your income into different categories of regular expenses. For example, categories can be split into three: essentials (bills, groceries, health, transport), non-essentials (shopping, eating out, entertainment), and savings (what is left from the essentials and non-essential categories).

It’s important to regularly monitor the budget and adjust as needed. You may find that you don’t need all the funds allocated in the non-essentials category, and you can move some of this money to your savings. 

1. Open a term deposit

Putting money in a term deposit is a safe way to lock up cash and earn a fixed rate of interest on it. Term deposits are fixed-term investments that involve depositing money into an account at a financial institution, like a bank, credit union, or building society listed as an authorised deposit taking institution (ADI). They are useful when saving for a deposit as individuals will know precisely how much they will earn and for how long.

Term deposits typically have a higher interest rate than most savings or transactional accounts. The interest rate can generally be increased by the amount of money put in or the length of the term.

It’s important to remember that while a term deposit is a beneficial resource for securely saving money, don’t expect to make a significant amount of money from it. For example, putting $5,000 with the average fixed interest rate of 3.85% in your term deposit will only generate $192 in interest after 12 months.

3. Consider EFTs

ETFs are fast becoming one of the most popular ways that young Australians are saving for large expenses, like a house deposit. An ETF (exchange-traded fund) is a basket of investments made up of assets (like stocks or bonds) and allows individuals to invest in different securities simultaneously. They typically outperform an average savings account as a safe, simple, and effective strategy that provides growth potential.

ETFs are also one of the most cost-efficient ways to increase diversification in your portfolio. Spreading investments across different company sizes, industries, and geographies can help protect your savings against the risk of market downturns.

ETFs are considered low-risk investments because they are low-cost, hold hundreds, if not thousands, of assets, and increase portfolio diversification – making them a top consideration for accelerating your savings for a deposit.

4. Get a helping hand  

Depending on personal and financial circumstances, help may be available to speed up the process of saving for a deposit.

For home deposits, each state government has a First Home Owner Grant (FHOG) scheme for which first home buyers may be eligible. The amount of the grant is different in each Australian state or territory. For example, the First Home Owner (New Homes) Grant in NSW is $10,000, whereas the First Home Owner Grant in South Australia is $15,000. 

Applying for a government Grant can significantly reduce the amount you need to save for a deposit.

5. Make minor lifestyle changes

Making minor lifestyle changes can significantly boost savings. Minor changes include buying second-hand, making the most of groceries (buy on sale, meal prep, limit takeaway), reducing subscriptions or sharing subscriptions, and limiting spending on going out, like having at-home game nights instead of movie nights at the cinemas. These changes may seem insignificant, but they can dramatically boost your savings.

For example, reducing daily takeaway coffee can amp up your savings significantly. On average, a cup of coffee in Australia costs $5.50, totalling $2,007.50 a year if you buy one daily. By cutting back your daily coffee purchase to once a week, you could save $1,721.50 per year!

Saving for a deposit and want to speed up the process? Consider implementing at least one of the above tips. If you don’t know where to start and want some experienced advice, contact your local loan expert. Before You Loan is powered by Australia’s most dedicated mortgage and loan brokers - use our Find a Broker search tool, and we’ll direct you to the right broker.