How do I set a savings goal?
In June we are focusing on managing your finances to help you get to a position where you can buy your first home. We’ll be giving you some helpful hints and tips on setting a saving goal, budgeting, improving your credit rating and choosing a savings account.
The main goal for most first time buyers is to save up enough for an suitable deposit. The higher your deposit, the better mortgage interest rate a lender will offer you. TMP Sherwins, an independent mortgage broker, says that for a shared ownership mortgage, there is still a very noticeable gap in rates available between 15% and 10% deposit. Whilst it’s not always necessary, a 15% deposit will result in much lower monthly repayments.
With that in mind, here are three steps that will help you with your saving:
- Identify your goal – what is it you want to save for? Is it a deposit for your first home, a new sofa, a bathroom re-decoration or even a new extension? Identifying what it is you want to save for will help you focus more when saving.
- Work out your monthly savings – this will depend on what you can afford and how long you want to save for. The bigger the monthly savings, the quicker you will reach your goal. Work out the cost of your goal, your current monthly outgoings and what is a realistic amount you can save each month. The Money Advice Service has a great calculator to help you with this.
- Open a new savings account and set up a standing order – if the money isn’t in your account then you won’t be tempted to spend it! Setting up a monthly standing order on pay day will help reduce the temptation and stop you running the risk of forgetting.