Getting the keys to your first home: for much of the mid-late 20th century in the UK, this was a standard and affordable rite of passage for most young people. Today? It’s a very different story.
Now, you can’t mention the words ‘saving for your first home’ without sparking a heated political debate. Can young people really afford deposits without help from their parents? Does our obsession with home ownership exacerbate inequality? Is home ownership, and the widespread ambition to achieve it, the Frankenstein that has produced a monster in the form of sloppy building regulations and cowboy firms that created residential tinderboxes all over the country?
These are all valid questions. Pushing young people towards property ownership, at all costs, has not always been a good thing. In some cases, it has been disastrous.
The government’s Help to Buy Equity loan scheme has given homebuilders a free pass to build poor-quality, often dangerous buildings at the lowest margins possible and then sell them at a premium. The scheme locks young buyers into expensive loans for homes that, frankly, aren’t worth the candle. But of course, ‘helping’ young people to ‘buy’ is a vote winner – few people will study the crappy small print, right?
Also, the home saving debate got mugged by the sentence ‘avocado brunch’, and only recently have we managed to escape its awful clichéd grip. It’s now widely accepted that talking about such luxuries is at best unhelpful, at worse demeaning. Many young people who struggle to pay their rent and basic living costs rightly baulk at being painted as feckless high rollers.
Having said that, I fear we’ve gone too far in the opposite direction, and that we risk discouraging lots of young people from saving for their first home and thus making a sound investment in their future. The pandemic has shown how renters are significantly worse off than homeowners, both in terms of quality of life and financial rights. I have yet to see any evidence that becoming a rent-centric economy would be an improvement on the current status quo, and may bring different but equally bad unintended consequences. So while that’s the case, we have to face up to the significant advantages that home ownership still has over renting – albeit with some key provisos.
Firstly, aspiring home buyers shouldn’t stretch their budget too far with small deposits and huge loans: they need to save up as much as they can. Secondly, they should avoid schemes with tricksy small print and liabilities further down the line, like Help to Buy. And finally, they should remember the classic principles of home-buying, from getting the location spot-on to aiming for a versatile house that can grow with you.
Aspiring buyers also need some solid practical advice on how to make their savings further. Look no further! Here are 4 ways you can save more towards your first home. Also, most of these tips work if you’re trying to invest more money.
1) Get on the LISA train
Firstly, if you’re really committed to saving for your first home, I would start with aiming to save at least £4000 a year, because then you’ll get the maximum free money from the government – £1000 per year – when you put that into a cash Lifetime Isa.
You can open one if you’re under 40 and you’re not limited to using it for properties covered under the Help to Buy equity loan scheme – it covers any property on the open market, as long as it costs under £450,000. The bonus is paid monthly too, so your deposit is accruing as you save. Of course if you can save more, and you probably should if you want to really build that deposit quicker, aim to put the extra amount in a savings account paying the highest possible interest rate.
2) Break down what you’re aiming to save
You’ve got to do your homework, and not just on average prices in the area where you intend to buy. You need to suss out if you would be eligible for a mortgage based on your earnings and credit history. Using an app like First Home Coach might help you suss out what aspects of your credit profile you need to work on, and what kind of mortgages you may be able to access.
If you intend to make the most of the LISA, break down what you’re aiming to save. Realistically, you’re looking at £333 a month (at least), or roughly £83 a week. If it sounds like too much, reduce the weekly or monthly sum and extend your timetable. You’ll need to face up to the trade-off between time and money – the more you save, the quicker you’ll reach your target.
3) Go for easy kills
Deciding to give up major treats straightaway is a recipe for failure. The key to establishing a sustainable lifestyle change that will help you save money is to make it as easy as possible. So, you might decide to keep one major lifestyle change you’ve been forced into during lockdown that has saved you a good chunk of money – choose the one you missed the least.
For me, I’ve noticed that beauty treatments pre-lockdown were actually an expensive placebo. I bought them thinking they would make me feel psychologically better, but now that I realise that they don’t make much difference to my hair and skin, I’ll be happy to drop them when we get back to normal, and only spend my money on things that really do make a difference (though in truth, most beauty aids cost nothing: sleeping well, eating a nutritious diet and exercise will do a lot of the hard work!)
4) Revamp your online shopping
If you’re in the habit of spending online when you’re bored or need a pick-me-up, get out of that passive mentality and create a little ‘spending book’ instead. As you go through your life, make a list of the stuff you need/want and put it in the book. If it’s not in the book, don’t buy it.
Then schedule shopping time and try to actively shop around to find that item at the best price. Keep that shopping window to just 1 hour a week, max. Prioritise practical essentials that you could really do with, but treat yourself to some little things that will help keep up morale.
5) Remove the bad influences
Anyone who has tried to overhaul their diet will know that if you keep a biscuit tin in the house, you’re using up precious willpower that is bound to crack. It’s better to just not buy those items and keep them in the house – then, you don’t even have to think about whether to resist the biscuit tin.
Well, it’s the same if you’re saving for your first home. Shopping apps are the financial equivalent of the biscuit tin. Just don’t have them on your phone and they won’t tempt you. Delete shopping apps and unfollow brands, shops and product-pushing influencers on Instagram: these make it really hard for you to resist passive purchases that suck up your savings when you’re in a low mood.
6) Rebalance your life
Set up your whole life so that it’s geared towards less spending and more towards low-maintenance hobbies and interests. This sounds dull AF. But the truth is that most of us have realised during lockdown how much joy and meaning we get from speaking to friends, getting stuck into an absorbing hobby, reading, being creative, simple exercise like running or yoga and just spending time outdoors. Structure your life so you spend as much doing that stuff as possible.
7) Keep your savings goal EVERYWHERE
Never lose sight of why you’re doing this – literally. Have a beautiful front door on the lock screen on your phone. Create a moodboard on Pinterest. If you use a ‘savings pot’ to round up your spare change from your shopping through an app like Monzo or Starling, give that pot the name ‘my amazing first home’, or some other title that will resonate with you.
There will be times where you may be tempted to give up or spend your savings: keep visual and written reminders all around you as to why you are saving for your first home, and what it will mean to you when you finally get what you want.