You think that your teenage years is too early to start saving up for a house, but with housing costs rising every year, it’s not such a bad idea.
In fact, in 2019, over 300,000 Gen Z-ers had mortgages, while four out of five of these young people believed they’d own a home within five years. A survey by Freddie Mac shows that Gen-Zers estimate 30 years old as the median age they will purchase a home.
A lot of the young generation indeed have other things in mind, like saving up for a car or a trip to Europe. But if you’re one of those who want to own a home soon, here’s how you can save to achieve that goal.
Open a Savings Account
If you’re serious about saving, you need a place to put your money. A savings account is the safest option, but teens under 18 might need a parent to help set it up. Ask your parents about trusted banks and reliable accounts. Those with a long history and high interest rates are worth considering.
Know What to Set Aside
It’s unlikely that you know exactly how much you need to save. Your dream home might change by the time you get to your early twenties, so it’s not advisable to scout for a definite property now.
What you can do is peg your savings at the current median home price. As of March 2020, the U.S. median home price was $320,000. A 20% down payment is $64,000. This may be a good starting point as you save. If you think that’s too steep, then save only 3.5% of the median house price (around $11,200), then get an FHA loan, which has a minimum down payment of only 3.5%.
Once you have a concrete goal, divide that amount by the timeframe you plan for saving it. You’ll then arrive at the amount you need to save per year or per month.
Look for Ways to Save on Your Expenses
Many get into the habit of skipping their monthly savings when they need more cash. To break this habit, look at your savings as a necessary expense. It’s not a negotiable aspect of your finance; instead, it’s a monthly obligation that’s just as important as food and gas.
A smart technique to hammer down on your saving habits is to record your spending, either in a notebook or in an app. Once you start, you’ll notice small spending habits that snowball into big expenses. You can make spending trade-offs or cut out some expenses entirely to help you achieve your long-term goal.
It’s never too early to start for a big goal, and even if you change your big goal as you grow into adulthood, you’ll at least have a financial headstart. The little sacrifices you make today will give you a little more comfort in the long run.