Saving up for your first home purchase

23 June 2023

Thinking of saving up for your dream home? Buying a house is one of the biggest purchases many of us will make in our lifetime. It’s a significant financial commitment – so it pays to start planning early. Here are some steps to map out a clear financial roadmap towards your first property purchase.

Establishing your financial safety net

Just like how any house needs a solid foundation, the first step to saving up for your first property is to ensure you have an emergency fund. You need a financial safety net that you can rely on when unexpected expenses, such as unemployment or unforeseen medical bills, arise.

Your emergency funds should cover at least 6 months’ worth of expenses and must be liquid. Ideally, emergency funds should be placed somewhere low-risk, liquid and interest-earning, such as StashAway Simple™, so they are not idle while remaining accessible when needed.

We wrote an in-depth article on how to save up for your emergency funds. You can learn more about it here.

Work out your savings plan and time horizon

Once you have a financial safety net, the next step is to map out your timeline: Are you planning to purchase a house in the next year or 5 years down the road? Knowing how much time you have to save up for your first property purchase will inform your savings and investment plan. Estimate the amount you need to set aside for a downpayment, your monthly mortgage payment, how long you have before realising your goal, and how much funds you’ve saved.

It is important to know your time horizon as different goals have varying time horizons. This affects the risk you can stomach. For instance, if you plan to make a downpayment in 5 years, you can afford to take on slightly higher risk as you can ride out short-term volatility in the stock market. 

Investing your way to your first home

Now that you know how much you’d require, you can make your money work harder for you by exploring some investment options beyond your standard fixed deposits and unit trusts.

Not all financial instruments and solutions are made equal, and there’s no one-size-fits-all investment strategy since it depends on your individual goal and risk appetite. That’s why at StashAway, we offer a suite of investment solutions customised to your risk preferences, goals, current financial situation, and investment experience. 

If you have a medium-term horizon of 3-5 years, consider investing your funds in a globally diversified portfolio that allows your capital to benefit from an appropriate level of risk and return over a longer period. Our General Investing portfolios, for instance, are diversified across multiple asset classes and geographies, thus allowing you to customise a savings plan at a risk level that you’re comfortable with. 

To make things even easier, you can use the StashAway app to get a personalised portfolio. Start by creating a goal through our General Investing portfolios, and you’ll be prompted to input some financial information, such as how much savings you already have, the size and location of the house you’re planning to buy, and when you intend to make your purchase.

Alternatively, check out EdgeProp’s resources, such as the median prices of properties across different locations, to determine the goal target for your dream home. Just key in the exact target and timeline alongside the savings you’ve set aside, and our algorithm will personalise a suitable investment plan for you based on the data provided. You can then review the recommended plan and make adjustments as necessary based on what you’re comfortable with.

Taking the first steps towards your goal

Saving up for a house takes time and discipline, but now that you have a solid financial plan, you can start working towards your goal by saving regularly and investing wisely.

A time-tested strategy for achieving your medium to long-term financial goals is dollar-cost averaging. Instead of trying to time the market by investing a single lump sum at once, you can make consistent contributions to your investment portfolio over time, so that you wouldn’t be vulnerable to whatever the market condition is when you invest.

Spreading out your large deposit helps to manage risks and build sustainable habits that will eventually enable you to reach your financial goals successfully. Learn more about the value of dollar-cost-averaging here

While we take care of your investments, don’t forget to review your financial goals regularly so that you can make appropriate adjustments to your plans whenever necessary. After all, understanding your financial health and staying committed to your goals is what will keep you on the right track to getting a house you can call your own.

This article was written in partnership with EdgeProp. To learn more about StashAway’s partnership with EdgeProp, visit their web page here

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