Question of the Day: What's the best way to save money for a down payment on a house?

[TopsyTurvy]

Saving for a down payment on a house is a big goal, but with the right strategy, it’s definitely achievable. Here are some of the best ways to save money efficiently:

### 1. **Set a Clear Goal**
- **Determine how much you need**: Most conventional loans require a 20% down payment, but some loans (like FHA loans) might require as little as 3-5%. However, putting down 20% allows you to avoid private mortgage insurance (PMI), which can add extra monthly costs.
- **Factor in other costs**: Don’t forget about closing costs, home inspections, and moving expenses when estimating how much you need to save.

### 2. **Create a Budget**
- **Track your expenses**: Use apps like Mint or YNAB (You Need A Budget) to monitor your spending and identify areas where you can cut back.
- **Prioritize savings**: Treat your down payment savings like a bill that needs to be paid every month. Set aside a fixed amount, ideally at the beginning of each month, before spending on other expenses.

### 3. **Open a High-Yield Savings Account or a Dedicated Account**
- **Separate your funds**: Keep your down payment savings in a separate account, so you’re not tempted to dip into it. A high-yield savings account can help your money grow faster than a traditional savings account.
- **Consider a money market account**: If you’re saving for a longer period, look into a money market account that offers higher interest rates than regular savings accounts.

### 4. **Automate Your Savings**
- **Set up automatic transfers**: Set up automatic transfers from your checking account to your savings account, ensuring that you consistently contribute to your down payment fund.
- **Take advantage of employer savings programs**: Some employers offer automatic payroll deductions into savings or retirement accounts, which can be a good way to ensure you save without thinking about it.

### 5. **Cut Back on Expenses**
- **Identify non-essential spending**: Cut back on things like dining out, entertainment, subscriptions, and impulse purchases.
- **Downsize temporarily**: Consider moving to a less expensive apartment or reducing your living expenses for a while to save more. You could also eliminate other large monthly expenses like expensive gym memberships or cable subscriptions.
- **Use windfalls wisely**: If you receive bonuses, tax refunds, or other unexpected money, put a large portion directly into your savings account.

### 6. **Increase Your Income**
- **Take on a side hustle**: Gig work (like driving for Uber, freelance writing, or online tutoring) can bring in extra cash that can be directly added to your down payment fund.
- **Sell unused items**: Sell items you no longer need, whether it's furniture, clothes, electronics, or collectibles. Use the proceeds for your down payment.
- **Ask for a raise or negotiate**: If it’s been a while since your last raise, don’t be afraid to ask your employer for one. Alternatively, consider switching jobs or industries for higher pay if it makes sense for your career.

### 7. **Look for Down Payment Assistance Programs**
- **Research local programs**: Many states, counties, and even cities offer down payment assistance programs, especially for first-time homebuyers. Some offer grants, while others provide loans with deferred payments or low interest rates.
- **Check federal programs**: The Federal Housing Administration (FHA), VA loans, and USDA loans often have low down payment options, which could be helpful if you qualify.

### 8. **Invest Wisely (If You Have Time)**
- **Consider a short-term investment account**: If your time horizon is a bit longer (2+ years), consider low-risk investment options like bonds or a diversified index fund. These can offer higher returns than a savings account, but remember there’s more risk involved, and your money may fluctuate in value.
- **Robo-advisors**: If you’re new to investing, a robo-advisor can help manage your investments for you with low fees and personalized advice based on your risk tolerance.

### 9. **Down Payment Gifts**
- **Ask for gifts or loans**: If you have family or friends willing and able to help, some people gift or lend money for a down payment. Be sure to understand any tax implications, and if it’s a loan, make sure the terms are clear.

### 10. **Take Advantage of Employer Homebuyer Programs**
- **Employer-sponsored homebuyer benefits**: Some employers offer homebuyer assistance programs, including matching contributions for down payments or homebuyer seminars. Check with your HR department to see if your company offers anything like this.

### 11. **Track Your Progress and Stay Motivated**
- **Set milestones**: Break your overall goal into smaller, more manageable milestones. Celebrate when you hit each one (e.g., saving your first $5,000, then $10,000).
- **Revisit your plan**: Every few months, assess your savings strategy. If you’re not on track, see where you can adjust — either by increasing income or reducing expenses more.

By combining these strategies and staying consistent with your plan, you can work toward your down payment goal more quickly. The key is discipline and finding the right balance between cutting expenses, increasing income, and making your savings work harder for you!

 

[_19disnA]

Not clear if you are asking or giving advice?

 

[tvguy]

Most basic step. Having the discipline to regularly save money.

My daughter has never made a lot of money, no more than $50,000 a year, in a county where anything below $60,000 is considered low income. Her coworkers with the same income who were renters could not understand how she save up a down payment while spending almost $300 a weekend on entertainment (including alcohol). My daughter's standard response has been, "because I couldn't afford to rent". We are in a crazy rental market, and my daughter's house payment/insurance were hundreds a month less than her coworkers rent.

 

[Allison]

Yes, that would be the basics.

 

[cvjw]

My son lived at home for 2 years after college and saved his salary. We also contributed financially to his down payment. He bought a townhome in September.

 

[LuvOrlando]

1) Move into your parents home and take care of them in their old age instead of putting them in a facility that will drain all wealth.
2) Inherit the house you live in with them when they pass away.

 

[Skippy918]

1) Move into your parents home and take care of them in their old age instead of putting them in a facility that will drain all wealth.
2) Inherit the house you live in with them when they pass away.

If your parents had you when they were young, you’ll be in your 60s by the time you have to take care of them. A new college grad can move back home to save money for a house, but their parents won’t really need any hands on help just yet.

 

[easyas123]

Most basic step. Having the discipline to regularly save money.

Once more, for folks in the back!!!!!!
When the eldest wanted to buy his first house he was a young man, having the time of his life. New boat for bow fishing? Sure! High dollar hobby supplies when less expensive were available, as were free use of items from his father and brother? Why not! Well, let me tell you - he had a come to Jesus when he realized it wasn't going to happen until he became more disciplined and better with his money. It was a hard lesson for him, he was not disciplined with his money. He could have saved a lot more sooner had he realized it earlier - but those kind of life lessons are good for some, especially those like my son who needed to learn the hard way. But learn he did, and today he is a homeowner. Nothing fancy, basic starter home.

 

[DawnM]

We are encouraging our boys to live at home after college (I have two in college currently) and save their income for a few years so they have a solid down payment. They will have a 2nd hand vehicle from us. They will have no debt for college.

My boys are good with their money. They have watched us through the years. We are savers. They know that and have picked up several good habits with saving.

 

[barkley]

some credit unions offer free in person and/or online workshops on working towards different financial goals-including home ownership. I think these can be of tremendous value because they speak not only to the financial implications of saving towards a down payment but also the ongoing and (more often than not) increasing costs of owning and maintaining a home. far too many first time homeowners fail to take into consideration that the numbers they estimate as their mortgage will be their fixed expenses over the life term of their loans when in reality property tax increases/homeowners insurance increases/HOA (if applicable) dues increases and such can substantially increase one's monthly costs. taking on the expenses of utilities and services traditionally bundled into rent (water/sewage/garbage/pest services) adds another monthly chunk of change. then add in taking on the financial responsibility of routine home maintainance and upkeep let alone large scale infrastructure repairs and replacements that naturaly come up over the years and unless a homeowner is budgeting and setting aside funds it can create a financial nightmare (anyone else replaced an HVAC system lately? we had to and that $17K was allot easier to deal with by virtue of having set aside money monthly for years in anticipation of larger scale expenses). the number that comes out of a mortgage calculator for the monthly cost of home ownership is just the BARE minimum cost.

1) Move into your parents home and take care of them in their old age instead of putting them in a facility that will drain all wealth.
2) Inherit the house you live in with them when they pass away.

if everyone is on board (parent/homeowners and their intended to be caretaker adult children) I just hope there is upfront and honest discussion /disclosure on the financial circumstances of the home. I suspect far too few adult children are aware of how many older family homeowners that they presume have paid off or are near payoff on a home they've lived in for decades are in reality decades off due to refi's and home equity loans. it's also not uncommon for some seniors to avail themselves of property tax 'reduction' programs their states offer that are in reality deferral programs that reduce their taxes during their ownership of the home but upon sale or death have tremendous leins that are due and payable (vital to find out if mom and dad are in a senior property tax EXEMPTION program vs a senior property tax DEFERRAL program). I'm in my 60's and have friends who have been in their same homes for well over 30 years but are nowhere near paying them off and their adult children have no idea. they've made decent incomes, lived non oppulant lifestyles but their well intentioned financial assistance in paying for their kids college educations and encouraging them to live free of charge in their homes post grad for several years 'to get ahead' has come at the cost of that home's equity.

 

[AnnaS]

Many great tips.

A few things come to mind.

Live below your means.
Stop buying Starbucks/Dunkin every day/more than once a day.
If you are big on going out/entertainment/eating out, cut it down.
Bring lunch to work/school.
You don't need every new/updated gadget unless it stops working (unless it's effecting your income) (phone, computer/TV, etc).

 

[barkley]

Many great tips.

A few things come to mind.

Live below your means.
Stop buying Starbucks/Dunkin every day/more than once a day.
If you are big on going out/entertainment/eating out, cut it down.
Bring lunch to work/school.
You don't need every new/updated gadget unless it stops working (unless it's effecting your income) (phone, computer/TV, etc).

I'll share some we use to reduce the cost of our regular monthly expenses (which could result in monies someone could set aside in their down payment savings)-

cell phone plan discounts-check your provider and look to what discounts they offer. with ours military, vets, first responders, teachers, medical workers (and their families) are eligible for a monthly discount, an AARP membership equates to a discount, auto pay with a debit card vs. a credit card is a discount. ours lets you stack discounts so we save about $30 per month.

insurance discounts-learn about what discounts your provider offers. have you gone to remote/work from home and reduced the number of miles you put on your car per year? that's a discount. can you manage to pay your auto insurance in full every 6 months vs. monthly? that's a discount PLUS you no longer may be paying a monthly surcharge for monthly vs. bi-annual billing. can you pay your renters insurance in one yearly payment vs. monthly? discount. on average we save about 15% employing these discounts.

credit card benefits (i'm only for these if you pay in full each month and don't rack up interest charges)-my amex has a deal wherein if I pay for some streaming services with their (no fee) card I get a statement credit so I set up autopay for Disney plus and get $7 kicked back. same card has had a promo going that if you pay an insurance premium with the card they will give a 10% statement credit up to $20. went ahead and paid my umbrella policy with it this month so I effectivly saved another 10% on that premium for the year.


it all adds up.

 

[lanejudy]

1) Move into your parents home and take care of them in their old age instead of putting them in a facility that will drain all wealth.
2) Inherit the house you live in with them when they pass away.

Unless it's an only-child situation, this really needs to be a family discussion point. Multiple adult children can't honestly have the full expectation of living back in the family home to care for mom&dad before eventually inheriting the house.

The house ownership issue aside -- caring for aging adults is a very challenging task. It's not as simple as just living in the same home, helping with housework, meals, etc. It becomes all-encompassing and may require the adult child to give up a job, which not only impacts current income but also future career potential and eventually retirement savings.

 

[LuvOrlando]

Unless it's an only-child situation, this really needs to be a family discussion point. Multiple adult children can't honestly have the full expectation of living back in the family home to care for mom&dad before eventually inheriting the house.

The house ownership issue aside -- caring for aging adults is a very challenging task. It's not as simple as just living in the same home, helping with housework, meals, etc. It becomes all-encompassing and may require the adult child to give up a job, which not only impacts current income but also future career potential and eventually retirement savings.

Many cultures have done this going back generations. Truth is most of the time there is only 1 kid willing to do it, I have never ever heard of kids fighting over who gets to do it, it is a calling. I grew up in my widowed grandmother's home which was passed down to my mother (her sister did not want in) and so did most of my friends. Now I am seeing it a lot with my own generation and while people live longer there so there is less widowing there is now divorce and one parent has a big house so they take on of their kids in who brings in a spouse and all, I have a few friends doing this right now. What happens is the parent gets older and needs help so their child, who is younger and stronger and able to work helps out with bills and keeping up on the home and it increases everyone's wealth because no-one can live on Social Security and kids today can't pay their loans and survive so people need to double up. When that adult child has kids (I was one of them) those kids get looked after by the grandparent and just end up taking over helping out with the house, my brother mowed the lawn and did handyman stuff while I often painted, did laundry, landscaping and other stuff. It's just a natural thing, I never resented a moment because my Grandma also took care of me in different ways. My grandma was in very poor health, was a cardiac invalid with severe depression and never saw the inside of a nursing home because she had a daughter and 2 grandkids looking after her plus a part time health aid Medicaid &/or Medicare covered. Along with us the aid was a enough, she did medical stuff like sorting her medicines for the day and got her to Dr appointments, bathed her and all that, I think it was good for Grandma that she had her own person who had lunch with her and watched TV. So many families did this in NYC I was honestly shocked when I saw how infrequent it was in PA when I moved there, not sure if it is a cultural thing or not but maybe it is.

 

[lanejudy]

Truth is most of the time there is only 1 kid willing to do it, I have never ever heard of kids fighting over who gets to do it

Very true and I never stated anyone fights over who gets to be caregiver.

However the reality is that the primary/largest/most valuable asset owned by many older adults is the home. And unfortunately adult children do fight over that asset when the parents are gone, especially if left to 1 child and the other(s) get basically nothing. Or 1 child assumes the home should belong to them in return for years of caregiving but finds they need to move, sell and split the proceeds with siblings. Thus my recommendation that a family discussion should occur if there is any intent by the parent(s) that the home will eventually be left to just 1 child.

 

[barkley]

Very true and I never stated anyone fights over who gets to be caregiver.

However the reality is that the primary/largest/most valuable asset owned by many older adults is the home. And unfortunately adult children do fight over that asset when the parents are gone, especially if left to 1 child and the other(s) get basically nothing. Or 1 child assumes the home should belong to them in return for years of caregiving but finds they need to move, sell and split the proceeds with siblings. Thus my recommendation that a family discussion should occur if there is any intent by the parent(s) that the home will eventually be left to just 1 child.

just putting this out there-even if a house or other assetts are being absolutely even Steven divided between one's kids it realy should be consideration to have someone other than one of the kids be the administrator of the estate. it's rare that there's not some kind of hurt feelings over the way a will is set up (grieving people get really petty and dredge up all kinds of attitudes over perceived favoritism over their lives/their sibs lives). the poor individual who gets stuck dealing with all the work of settling an estate gets all the anger and resentment directed towards them. our household learned of this not at all rare dynamic (according to the multiple lawyers and law enforcement professionals we had to enlist) when we discovered we were named to handle 2 different family member's estates. never asked for the job, offered it up to others who were directing their anger about why we were chosen 'over' them/ other sibs getting the same cut they were getting towards us (yeah-no one was
willing to step up surprise, surprise). WORST JOB EVER-and it's a JOB even in the best set up will/trust/p.o.d. situation. it's horrific that two different families ended up with permanently estranged family members-not the legacy most parents hope to leave.

 

[cvjw]

1) Move into your parents home and take care of them in their old age instead of putting them in a facility that will drain all wealth.
2) Inherit the house you live in with them when they pass away.

Most parents are elderly before they need live in, full time care. That puts the children in middle age when the need arises. Most people already own their own home in middle age. I don’t know anyone who this would work for. Grand children possibly. But if a house was left to a grandchild, bet there would be lots of angry children who were skipped over.

 

[LuvOrlando]

Look, the gist of this seems to be a lot of people loathe the idea of taking care of parents or being cared for I suppose.

No need to give reasons, if I disagreed I would just read and be like, not for me & move on. Seems odd for me to defend what feels natural for me so I'm just not gonna. If its not your scene so be it, not looking to convince people who hate the idea. It's how I grew up and how many of my friends grew up and was a great way to transfer the equity wealth of a home without paying tons in taxes or losing it to state medicare clawback laws but if you'd rather pay out of pocket because you want it that way, go for it lots of people do.

 

[tvguy]

insurance discounts-learn about what discounts your provider offers. have you gone to remote/work from home and reduced the number of miles you put on your car per year? that's a discount.

Not necessarily. I could result in a premium increase. I called my auto insurance company when my wife went back to work part time expecting a premium increase. Nope, it dropped my premiums because the rate of claims paid on cars used to commute to work is lower than on cars used 100% for leisure driving. And he said they are now raising rates on those who work from home for the same reason.

 

[tvguy]

. I suspect far too few adult children are aware of how many older family homeowners that they presume have paid off or are near payoff on a home they've lived in for decades are in reality decades off due to refi's and home equity loans. it's also not uncommon for some seniors to avail themselves of property tax 'reduction' programs their states offer that are in reality deferral programs that reduce their taxes during their ownership of the home but upon sale or death have tremendous leins that are due and payable (vital to find out if mom and dad are in a senior property tax EXEMPTION program vs a senior property tax DEFERRAL program). I'm in my 60's and have friends who have been in their same homes for well over 30 years but are nowhere near paying them off and their adult children have no idea. they've made decent incomes, lived non oppulant lifestyles but their well intentioned financial assistance in paying for their kids college educations and encouraging them to live free of charge in their homes post grad for several years 'to get ahead' has come at the cost of that home's equity.

Unfortunately, in too many instances I have seen, it just adds up to poor financial decisions. Or like the lady across the street from me. No kids. In short, she and her husband elected to take equity out of their house as it built up and invest it elsewhere. He died unexpectedly and she was stuck with hundreds of thousands of dollars invested in way that they could not be easily liquidated or under current market conditions, could only be liquidated at a huge loss. She was forced to sell her house and is renting it back. Her rent is more than she brings in each month, but she did bank a couple hundred thousand dollars, so now she has some liquid assets.