How to Save For a House Deposit Quicker
Most of us dream of owning our own house.
However, house prices continue to rise and owning a home has never been more expensive.
According to Zoopla, in 2023 the average first-time buyer in the UK put down a £34,500 deposit (15%) for a £240,000 3-bed home.
Typically though, most first-time buyers will try to put down a larger deposit for their first home.
If we use 20% as the target, the average buyer will need to save £48,000 to comfortably afford a deposit for an average house. This amount will rise and fall based on your location but we’ll stick with the average for now.
This is not an insignificant amount of money. Most people won’t be able to save for this without a clear plan of action and active effort. This article will give you a 4-step action plan to help you save for a house deposit as fast as possible.
Step 1: Review your finances and set a goal
First, start by thoroughly analyzing your current finances. What are your monthly expenses and how much income do you receive? Do you already have savings?
This gives a clear picture of how much excess money is available to put towards a deposit each month.
Then think about the type of house you’d like to buy and how much it is likely to cost. Establish the deposit amount that you need and set a target for when you want to save this.
For example, let’s assume you will need a £50k deposit to buy the house you want. You already have £10k saved up. You then set a goal to save the remaining £40k in the next 4 years. You can further break this down into milestones. For instance, £10k each year or £833 a month.
This gives you a clear goal to work towards.
Step 2: Start saving
Set aside a certain amount of money each month to put in a dedicated account for your house deposit. Automate this process by setting up a direct debit to this account on the same day you receive your paycheck so that you’re not tempted to spend it.
One of the fastest ways to increase your savings is by clearing unnecessary expenses. Track where every pound or dollar is being spent over a month using money management apps. This will help you identify any wasteful subscriptions, frequent takeout dinners, or impulse shopping.
Be balanced though. If you cut back too much, you may demotivate yourself and make it harder to stick to your goals. Set a sustainable target that you are likely to stick to.
Step 3: Increase your income
It may not always be possible to cut your expenses. Really, the best way to save more is to simply earn more.
Look at ways to grow your income streams:
- Negotiate a pay rise or promotion at work
- Take on a side hustle nights/weekends
- Monetize existing assets e.g. rent out parking space
Even an extra £200-500 each month makes a noticeable difference when dedicated solely to savings!
Step 4: Invest your money
Once you’ve cut your expenses, increased your income and established a savings habit, the next step is to turbocharge your savings by investing.
We’ve done an entire article on the topic of whether you should save or invest which you can read here. In a nutshell, if you keep your savings in a savings account, over time, inflation will erode the value of your savings.
Investing allows you to earn money on your savings, making your money work for you and will allow you to reach your savings goal quicker.
What’s the best way to invest?
This is a topic which we’ve written extensively about. We strongly believe that the best way to invest is to do so passively in a diversified investment portfolio with a long-term mindset. To read more about this, check out our article on passive investing here.
Wahed allows Muslims to invest their money passively in a diversified, low-cost and most importantly shariah-compliant way.
We do this by investing your money into different investments that are matched to you, and that you feel comfortable with. Just choose your desired risk level and we’ll handle the rest. You can create a pot specifically for your house deposit and name it appropriately to keep you focused and motivated on your goal of saving for a house.
Wahed has already helped 300,000 Muslims across the world to grow their wealth in a way that is in line with their faith and values.
To join them and start your journey to halal¹ investing, sign up here.
1. The term 'Halal' denotes that it is permitted and follows Islamic law
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