It’s common knowledge that first-time buyers are getting older. There are lots of reasons for this. Many of them relate to the fact that people are living longer. Some, however, relate to the difficulties of getting on the property ladder. In particular, first-time buyers often struggle to put together a deposit. The good news is that strategy can help a lot here.
The importance of attitude
Some of the challenges related to saving are definitely practical. Although first-time buyers are getting older, they are still likely to be relatively young adults. This has two key implications. Firstly they will be at the lower end of their earnings potential. Secondly, they will probably want to make the most of their pre-child years.
Both of these points can make it difficult for young adults to focus on saving for anything let alone a deposit. In fact, saving for a deposit can seem like an impossible goal. Young adults may put money into a “deposit fund”. They may, however, find it hard to commit enough to make progress in the sort of timescales they would like.
This can set up a bit of a vicious cycle. Young adults don’t make saving for a deposit one of their top priorities. As a result, they don’t make encouraging progress so they lose their motivation to save. They may also be disheartened by seeing how house prices keep increasing faster than their savings.
If young adults can be persuaded to prioritise saving for a deposit astutely, they can make a lot of progress with minimal effort and sacrifice. This can help to motivate them to keep going. Family and friends can help a lot here, not necessarily financially, but by giving younger adults the emotional support and encouragement to keep going.
Small savings really do add up
Probably the key lesson most young adults need to learn is that pennies really do turn into pounds. What’s more, they’ll turn into pounds even faster if you give them a helping hand. This doesn’t have to mean cutting out everything you enjoy. It doesn’t even have to mean significantly cutting back on everything you enjoy. It simply means using your income mindfully.
Be very careful with credit
Credit is a bit of a double-edged sword, especially for young adults. On the one hand, you need it to build up that all-important credit rating. On the other hand, it can work out very expensive. Access to credit can also tempt you into making purchases you wouldn’t otherwise have bought. This includes impulse purchases and convenience purchases, both of which can severely damage your finances.
Get the best deal on everything
Do your research before every purchase, including regular ones like food and cleaning products. The first question you need to answer is “Do I really need or want this?”. Even if the answer seems obvious, ask the question anyway. You might surprise yourself.
For example, you might be spending your money filling up your trolley on (partly) ready-made foods. With a bit of organisation, however, you could probably make your own instead. That could save you a lot of money.
Learn (or relearn) household skills
There are definitely times to call in the pros and pay for their skills. There are, however, also times when you can save a lot of money just doing it yourself. Anyone can learn basic cooking, sewing, household management and household maintenance skills. Again, these can save you a lot of money with very little effort.
Put your savings to work
If you’re a first-time buyer, then probably the most obvious place to keep your deposit is a Lifetime ISA. The advantage of this is, clearly, the fact that the government contributes to your savings.
Be aware, however, that there is a penalty for withdrawing savings for any purpose other than buying your first home or funding your retirement. It’s therefore highly advisable to have an emergency fund and/or insurance you can access if necessary.
If you can’t do this, or just don’t fancy the Lifetime ISA, then you might want to look into other options such as regular ISAs. These don’t have the bonus you get with the Lifetime ISA but could offer much more flexibility.
For investments, we act as introducers only
Comentarios