So last week, I dipped my toe into the blogging world and wrote my first post explaining how I wanted to document our journey into home ownership. For this post I’m going to go into how we’re saving and the reasoning behind it.
The seed is planted (2013-2015)
So I’m not originally from the UK. I moved to London from New Zealand at the age of 24 intending only to stay for a short amount of time to travel and see more of the world…
Nearly six years later, I’m still here. Married with a child.
The reason I start with that is because while I was travelling and deciding what I wanted to do with my life, I wasn’t terribly good at saving. Or, I did save, but it was all going towards short-term goals, like affording the next holiday. I did discover a few Personal Finance (PF) blogs I enjoyed reading such as Mr Money Mustache, Money After Graduation and Making Sense of Cents.
The seed begins to grow (2015-2017)
It wasn’t until early 2015 when we were saving for our wedding later that year that I started saving in earnest. I also started investing in index funds. This was after reading a tonne of articles and books about the topic until I felt confident to part with my money (and even then not too sure!). I found the Monevator blog incredibly helpful, especially since it was UK specific. I also subscribed to Rockstar Finance to gain the perspective of many other people in similar or better situations.
Stocks and Shares ISA
I first put £150 into a Stocks & Shares ISA (Individual Savings Account) in April 2015 and have been investing monthly ever since. The monthly amounts have ranged from £50 when times have been tough to £300 when we’ve had enough to do so. We’ve never had a lump sum to put away, the most important thing has been depositing the money and letting it grow. Buy and hold. It seems to be working so far.
Help to Buy ISA
I first read about these on the Money Saving Expert website. Basically you can deposit up to £1200 in the first month you open the account and then a maximum of £200 in subsequent months. The UK government then tops up your contributions by 25% when you buy your first property (as long as you have a minimum of £1600 saved up). This seems like a great deal however there are terms and conditions to look out for. Particularly the value of the property you’re buying and whether it is in or out of London. You also won’t get the bonus to help with the deposit which has thrown a few people. Still, since opening this account in December 2015 and contributing to it every month, I’m surprised at how quickly our contributions added up.
For more information about H2B ISAs, check out the Moneysaving Expert website
This is a relatively new product launched in the last year. Anyone aged 18-39 can open a LISA account and contribute up to £4000 in the tax year. The government will then top this amount up by 25%. Although it sounds very similar to the H2B ISA above, there are a few key differences. The money saved in a LISA can only be used to buy your first property or for your retirement otherwise you will be hit by a 25% penalty when you withdraw funds. You can invest in stocks or cash with the LISA but there aren’t many providers out there and only one who has the cash ISA with a not so great interest rate. A strategy that many people are employing (ourselves included) is transferring their H2B ISA into a Lifetime ISA as for the first year only, the government will pay the 25% bonus on all of it.
For more information about Lifetime ISAs, check out the Moneysaving Expert website
Currently we have a Stocks & Shares ISA, a cash Lifetime ISA (with our transferred H2B ISA amount) which we just received the very first bonus payment for, and a regular savings account that pays slightly higher interest rate. We’re hoping to put more money towards our deposit fund in the coming months as I am back at work and that October deadline is rapidly approaching!
I think no matter how you’re saving for a deposit/downpayment for a home, the most important thing is to be consistent with your savings and put something away regularly (we found monthly was best for us as that’s how we’re paid).
How did you end up saving for a deposit or another large purchase?