Saving Up to Buy a Home

Posted by: Michael S. | Jan 12,2008


Many of the tips and tricks for saving money are similar for each demographic (Retirement, Recent College Grad, et al.) but for entirely different purposes.  For instance, Sophie at Retirement recently wrote about how budding retirees should set up automatic deposits from a checking account that will go directly into a high-yield savings account explicitly for retirement.  

Well, I write for newlyweds and so I would recommend doing the very same thing but have it aimed at buying a home.  At the very least, this money can be used as an emergency fund.  You should only dip into a home fund if it is of absolute necessity.  

They say that you should start saving for retirement as early as possible.  That’s a pretty tall order for young newlyweds.  Not only is retirement a long way off psychologically, but they’ve got a number of other financial concerns in the meantime – i.e. they’ve not yet bought their first house or had their first child.  For many newlyweds, the issue of retirement necessarily comes well after these other highly-important issues.  This means that newlyweds may not even deposit money into a 401(k) matching fund, as they’ll want to save that money for a down payment on a home and setting up a nursery.  

No one’s bank account is limitless (well not no one, but most people) so there are times when you have to make the tough decisions and prioritize how you spend and save your money.  For newlyweds, it’s usually buying a home and having a child so by all means make this a priority.  In doing so, you should set up automatic deposit into a high-yield account and/or put money into a high-yield mutual fund account.  

Ideally, you’ll set aside money for an emergency fund first and then build from there.  This depends on your combined salary.  Sometimes you’ll have to save for a home first.  The trouble with a mutual fund is that it can require a fairly high initial deposit.  So if you’re really strapped for cash, you should open up a bank-affiliated savings account or in an online enterprise like ING.  

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