From experience I know saving money can be hard! As someone who loves a bit of retail therapy or a nice holiday somewhere exotic, it takes a bit of dedication to save money each month. But it’s also so important! Saving for your first house deposit is one of the most significant financial goals you’ll ever undertake. It’s a journey that requires careful planning, discipline, and a clear strategy. Whether you’re dreaming of a cozy starter home or aiming for something more substantial, building that deposit can seem daunting. However, with the right approach and a few smart money-saving techniques, you can reach your goal faster than you might think. In this post, we’ll explore practical tips and strategies to help you save effectively, so you can turn your homeownership dreams into reality.
Our Story
In 2019 my now husband, Matt, and I decided it was the right time to buy our first house together. Before 2019 there was never the right opportunity; I’d been a Uni student and moved away for my first job, whilst Matt was studying for his accounting qualifications. Finally, we were living and working in the same place, so we went for it! Neither of us had any experience with buying a house, which made the process feel even more daunting. I don’t think we ever realised we were about to embark on an almost year long journey! But we finally made it and we couldn’t be happier with our little home.
Key factors to consider
- Create a budget
- Open a high interest savings account
- Automate your savings
- Limit expenditure
- Reduce debt
- Take advantage of government schemes
- Start investing
- Increase income
1. Create a budget
Creating a budget is one of the most powerful tools when saving for your first house deposit. A well-crafted budget provides a clear picture of your income, expenses, and spending habits, helping you identify where your money is going each month. I’ve dedicated a whole blog post to help you get started with budgeting.
By tracking your finances closely, you can pinpoint areas where you might be overspending and make necessary adjustments. For instance, you might discover that a significant portion of your income is being spent on non-essential items like dining out or getting a cheeky Costa coffee (I’m guilty of that).
With this knowledge, you can allocate more funds towards your savings by cutting back on these areas. Over time, these small, consistent contributions will accumulate, bringing you closer to saving enough money for your first house deposit.
2. Open a high interest savings account
I’ve had a savings account for as long as I can remember. There are so many to choose from, it can be quite overwhelming. Forbes has created a great list of pros and cons for the different types of savings accounts to help you get started.
Opening a high-interest savings account is a powerful way to boost your savings for a first house deposit. Unlike regular savings accounts, high-interest accounts offer significantly better interest rates, meaning your money grows faster over time. This can make a noticeable difference, especially when you’re saving over several years.
Additionally, these savings accounts often come with features like restrictions on withdrawals, which can help you resist the temptation to dip into your savings, keeping you focused on your long-term goal of homeownership.
3. Automate your savings
Automating your savings is one of the most effective ways to ensure you consistently contribute to your first house deposit without the temptation to spend that money elsewhere. By setting up an automatic transfer from your bank account to a dedicated savings account, you create a system that prioritises saving over spending.
Each time you get paid, a portion of your income is automatically moved to your house deposit fund, allowing your savings to grow steadily without any extra effort on your part. After all an out of sight out of mind approach not only makes saving easier but also reduces the likelihood of dipping into your savings for non-essential expenses.
4. Limit expenditure
Limiting your expenditure is a powerful way to accelerate your savings for a first house deposit. By consciously cutting back on non-essential spending, you can free up more of your income to put towards your deposit goal. When you start budgeting and tracking your expenses, you can easily identify areas to make cut backs and reallocate money to your savings.
Changes that made the biggest difference for us included preparing meals at home instead of dining out and finding more affordable alternatives for date nights. This disciplined approach not only helps you build your deposit faster but also instills good financial habits that will serve you well as a future homeowner.
5. Reduce debt
Reducing debt is a crucial step in saving money for your first house deposit. High-interest debts, such as credit card balances or personal loans, can drain your finances, making it harder to save.
By prioritising debt repayment, you not only free up more of your income but also reduce the amount of interest you’re paying over time. This extra cash can then be redirected into your savings account, allowing your deposit fund to grow faster. Additionally, lowering your debt improves your credit score, which can lead to better mortgage rates when you’re ready to buy, ultimately saving you even more money in the long run.
6. Take advantage of government schemes
For anyone living in the UK, make sure to take advantage of government schemes, as these can significantly boost your efforts to save for a first house deposit.
The Lifetime ISA program can be used to buy your first home or for later in life. People aged between 18 to 40 can open a Lifetime ISA and can pay up to £4000 per year into the scheme until they turn 50. The government will add a 25% bonus, up to £1000 per year. In other words you pay £4000 and receive £5000.
Also remember first time buyers are eligible for tax relief options, like the Stamp Duty Land Tax (SDLT) exemption. This significantly reduces the cash required to buy a house and should be an important consideration when buying. By utilising these schemes, you can effectively reduce the amount you need to save on your own and reach your deposit goal faster.
7. Start investing
Investing can be a powerful tool to accelerate your savings for a first house deposit. While traditional savings accounts offer security, they often come with lower interest rates that may not keep up with inflation.
By contrast, investing in assets like stocks, bonds, or mutual funds has the potential to yield higher returns over time. Although investing does come with risks, a well-researched and diversified portfolio can grow your savings significantly faster than leaving your money in a low-interest account. This is particularly attractive for those who plan on buying in several years (rather than a few months).
Check out my blog post on how to build an investment portfolio to get you started. Just remember, it’s crucial to align your investment strategy with your risk tolerance and time frame, and consider consulting a financial advisor to help optimise your approach.
8. Increase income
Increasing your income is one of the most powerful ways to accelerate your savings for a first house deposit. By boosting your earnings, you can significantly shorten the time it takes to reach your deposit goal. This extra income doesn’t have to come from major life changes—sometimes, small adjustments can make a big difference. Consider taking on a part-time job, freelancing, or turning a hobby into a side hustle. Ultimately it’s time to get a bit creative, maybe even start an blog!
The key is to channel this additional income directly into your savings, rather than increasing your spending. By doing so, you’re not only increasing your deposit fund but also building a financial cushion that will be invaluable when you finally purchase your home.
My deposit
I wanted to be as transparent as possible about how I used these 8 principles to help me save for my first deposit.
The majority of my deposit came from savings and I decided to automate this so at least 20% of my income was saved per month. I facilitated this by setting a budget and reducing my expenditure.
I took advantage of a government scheme and set up an ISA as soon as I turned 18. My biggest regret is not paying more money into this. In hindsight the 25% bonus from the government far exceeded the interest rates from my savings account.
A small portion of my deposit came from investing. My portfolio was in its infancy at the time when we brought our first home. I was able to sell some shares and use dividend money.
| Source | Amount Saved |
| Savings Account | 55% |
| Budgeting (reducing shopping sprees, fewer takeaways) | 7% |
| Government scheme ISA (including bonus) | 28% |
| Investments | 10% |
Final thoughts..
Saving for your first house deposit may seem overwhelming, but with a strategic approach, it’s entirely achievable. By implementing these eight strategies—budgeting, automating your savings, cutting unnecessary expenses, leveraging government schemes, increasing your income, and more—you can steadily build the funds needed to secure your dream home. Remember, consistency and discipline are key. Each step you take brings you closer to your goal, turning what once felt like a distant dream into a tangible reality. Stay focused, keep your eye on the prize, and before you know it, you’ll be holding the keys to your new home.
