Wednesday, February 5

how to protect your money when saving for a home.

Your home is probably the biggest financial commitment you will ever make ~ and it certainly feels that way when you are saving for your down payment. Even for a couple with two incomes, coming up with a 25% deposit on a home can take years and involves all sorts of sacrifices. One of the problems is that inflation is working against you while you are saving ~ house prices generally go up all the time, despite the recent problems we've had. However, if you put all the money you save into the bank, you’re going to get very little interest ~ less than 1% ~ or none at all.

On the other hand, you don't want to put your money into risky investments ~ you want it to be there when it's time for you to buy a home. That's what makes saving for a house such a dilemma. How do you keep up with inflation, while making sure that your money is secure?

One approach is to put your savings into certificates of deposit (CDs). These are just like a savings account, except that you can’t take your money out until the CD expires ~ this is known as the term of the CD. For example, if you are planning to buy a house in two years' time, you can put your money into 2-year CDs. Just like savings accounts, the federal government insures CDs, so you won't lose your money if the bank goes bankrupt. While most CDs only give you around 1% a year, you can find CDs that pay considerably more ~ for instance, look at this 2 in 1 CD account at CIT Bank.

If you are comfortable with a little more risk, consider buying treasury bonds. There is no chance that the government will default on these ~ so they are completely safe from that perspective ~ but there is a chance that the price will go down if interest rates rise. This is because it if your bonds only pay a low interest rate compared to the current interest rate, they become less attractive to other investors. Right now, however, interest rates are unlikely to rise in the short-term ~ in fact, the Federal Reserve says they will not start to raise interest rates until unemployment drops below 6.5% ~ and they are hinting that they might drop this to 5.5%. So, if you have a short-term savings goal, then treasury bonds may be an option.

Finally, if you want to take slightly more risk, consider investing in an index-linked fund. This type of fund tracks the overall value of a particular stock market index, such as the S&P 500, rather than investing in individual stocks. While index-linked funds can still go down in value, they are much more stable than if you invested all your money in a single company ~ or even a few companies. You can also get a good return on investment ~ or instance, if you had invested in one this year, you would have made more than 20% on the money that you put in.


  1. We actually have invested a small amount towards out down payment into a bit more of an aggressive money market account and have done pretty well on it in the last year or so. The rest is in a safe, savings account, but that added money that is separate has done well for us and I am not touching it as of yet. Great advice though and thank you for sharing about this here today :)

  2. Oh I'm so happy to hear that you are accumulating savings towards your house. Looks like that dream of yours is slowly becoming a near reality :) I'm excited for you! This was a good article to share, and glad that I can still do things like this even though I'm not actively blogging. Now stay warm and safe out there in this crazy storm!

  3. My boyfriend and I just bought our first house a little less than 2 years ago. We were saving for 3 years and still didn't have enough for a deposit. But we found a program for first time home buyers and we didn't have to put a single dollar down as a deposit. Which worked out great for us because we got to use the money that we saved on furniture and things for the house. I think we just lucked out with our house buying experience because our mortgage company (Avrus Mortgage) was great, our realtor was amazing. We ended up buying the 3rd house that we looked at.

  4. Or you call me and invest! LOL
    I miss you mama :)


  5. I love this! We are trying to save for a house... I think if we get that new place in town we won't be able to save much though. So much to think about... Thanks for posting this. I didn't know what a CD was.

  6. Great post! Buying a house is so much to think about. When we talk about it, I'm always tempted t think where our money could go and actually grow!


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