Best Way To Save For A Home Deposit In 18 Months While Renting

Best Way To Save For A Home Deposit In 18 Months While Renting

The Australian property market is showing signs of slowing down, particularly in areas like Sydney and Melbourne, which have seen significant price increases in recent years. A report from the Switzerland-based bank BIS highlights that Australia has experienced one of the most sustained property market booms globally. Property prices have been rising steadily since the 1960s, benefiting homeowners and investors but making it increasingly difficult for first-time buyers to enter the market. Wages have not kept up with property prices, leaving many first-time buyers unable to afford a home and forced to rent long-term.

In 2024, Bankwest revealed that first-time buyers, on average, take 4.6 years to save for a 20% deposit. With a median-priced home now costing $720,000, buyers need to save a hefty $144,000 just for the down payment. For a single person, this saving capacity is even more challenging.

Lending Criteria and Affordability

Tightened lending criteria and affordability challenges continue to impact the property market. If the market slows down further, we could see more affordable properties entering the market—good news for first-time buyers. But before buying a property, you need to have a 20% deposit saved, which can be a significant challenge for renters looking to save while living in a rental.

To illustrate how a couple can save for a home deposit while renting, let’s follow Josh and Samantha’s journey.

Josh is an insurance underwriter earning $90k per year, while his girlfriend Samantha works as a waitress, earning $22k annually. Despite both working, they struggle to save due to a love for socialising, frequent holidays, and hobbies. Josh owns two cars, and Samantha has two rescue dogs. They both enjoy gym sessions and eating out, along with the occasional barista coffee.

Together, Josh and Samantha earn $112k annually, or $9,333 per month. However, they pay $2,500 monthly for rent, $320 for utilities, $700 on dining out, and spend considerably on credit card balances, car loans, vacations, clothes, and other expenses. By the end of most months, neither of them has much saved. But with a goal of saving $144k for a 20% deposit in 18 months, they realise a serious change is needed.

Creating a Budget

It’s important to be transparent about spending habits, especially in relationships, as financial stress is a leading cause of relationship breakdowns. With all the information in front of them, they discover how much they’re spending on things they hadn’t realised, like gym memberships, takeout food, and socialising.

Cut Back on Spending

Once they’ve understood their spending patterns, Josh and Samantha identify areas where they can save. Although challenging, they believe it’s possible to reach their $144k savings goal in 18 months if they cut back on non-essential spending.

Move to a Cheaper Apartment

Their first step is to move to a more affordable rental. Though they love their current neighborhood, it’s expensive, so they decide to relocate to a cheaper area. After some research, they find a new place that saves them $1,000 a month on rent.

Cut Back on Household Spending

Josh and Samantha also decide to make more changes in their daily lives to cut costs. They cancel their gym memberships and opt to work out together in local parks. Both enjoy running and cycling, so they commit to these activities instead. Josh also decides to cycle to work, taking advantage of a nearby cycle route, while Samantha continues to us

e public transport.

They switch to a more affordable health insurance plan, find cheaper utility suppliers, and avoid upgrading their smartphones every year. Entertainment is another big expense. Josh realises that he typically spends $20,000 over 18 months on nights out with friends. He commits to cutting this in half, saving by staying in more often.

Cut Back on Travel

The first step to saving is creating a budget. Without tracking where money goes, it’s impossible to save effectively. Josh and Samantha, who share a joint account for bills and separate accounts for personal expenses, sit down together to assess their finances.

Josh and Samantha love to travel, often spending around $7-10,000 annually on trips. To save for their deposit, they agree to forgo holidays for the time being. Instead, they plan a trip to visit Josh’s mum in Melbourne and save money by asking a friend to dog-sit instead of putting the dogs in a kennel.

By the time they’ve made all these adjustments, they realise they can save the required $5,700 per month to reach their target of $144,000 in 18 months.

They commit to putting every spare dollar into a high-interest savings account, allowing it to grow with interest over the 18-month period.

At the end of the 18 months, Josh and Samantha have enough saved for their 20% home deposit. Their new spending habits have become second nature, and they’ve even started to enjoy watching their savings grow. They are excited about furnishing their future home and starting a family when the time feels right.

If you want more help or advice contact us today at The Property Associates!