Have you ever wondered how you’ll ever save enough to finally make the seemingly giant leap onto the property ladder? The average deposit required in the UK for first-time buyers rose to around £48,350 after the pandemic. Crazy, right? Below I’ll share some useful tips to help make that figure feel far less daunting through four key steps.
1. Create a Clear Goal
The first tip for any successful financial plan is to set a clear goal. This not only helps you stay disciplined but also makes it easier to monitor progress while giving you something tangible to work towards. While having a monetary amount in mind is important, also consider setting a specific timeframe for when you want to reach your goal. This provides structure to your saving and allows for regular progress checkpoints, whether monthly or quarterly.
2. Build a Sufficient Budget
Once your goal is set, the next step is to create a budget. Start by listing all your essential expenses so you know your disposable income. Make sure to leave enough room for the occasional Friday night at the local. Then you can work out how much you’re able to save each month. Discipline and consistency are more important than one-off, large contributions. Choose an amount you can commit to each month, even when the weather’s warm and the beer garden is calling louder than your savings account.
3. Put the Plan into Action
A great starting point for any first-time buyer aged between 18 and 39 is the Lifetime ISA (LISA). The government offers a 25% bonus on your contributions, currently capped at £4,000 per year. For example, if you save £1,000, the government adds £250 for free.
There are two types of LISA: a Cash LISA and a Stocks & Shares LISA. Which one suits you better depends on your timeline. If you’re not sure, it’s a good idea to speak with a financial adviser.
As a general rule
- If you plan to buy within three to five years, a high-interest savings account may be a better fit
- If your timeline is longer, inflation may eat into your savings, so a diversified investment approach might make more sense
If you plan to save more than £4,000 a year, your next best option is a standard ISA, which allows you to save up to £20,000 a year in a tax-free environment. This can also be either a Cash or a Stocks & Shares ISA.
4. Adopt a ‘Savings First’ Mentality
If getting on the property ladder is your top goal, then treat it as your top priority. Once your budget is in place and you know how much you can save and how long it will take, stick to the plan. Set up a standing order or direct debit so your savings are automatically moved into your ISA or LISA on payday. This helps avoid the temptation to spend and makes the process automatic and stress-free.
Let your money work for you behind the scenes, so you can enjoy life without constantly worrying about your savings.
Following these 4 steps should make that £48,350 average figure for a house deposit in the UK not only feel less daunting but also achievable. We are always happy to discuss your financial plans and goals, please feel free to contact me to discuss any of the above points in greater details. Here’s to getting on the property ladder!
