HOW TO SAVE FOR A DOWNPAYMENT

SAVING for the deposit on your first home requires a disciplined approach, says Gerhard van der Linde, the managing director of Seeff Pretoria East.

“When you are serious about saving money, the best thing to do is to speak to a financial adviser as soon as possible. There are different ways of saving, and every method comes with its own associated risks,” Van der Linde says.

“If you want to save money over the short term (two years or less), it is usually best to opt for an account where the interest rate is fixed and you have no risk of losing any money. But if you have a longer-term approach in mind (two to five years), it is better to invest your money in an exchange traded fund or unit trust in order to generate a higher return.”

He says the following points are also important when saving:

• Do not save money in an account that you use to transact. Open an account specifically for the purpose of saving.

• Save automatically by setting up a debit order that goes off your transaction account. If you don’t do this, you may spend the money instead.

• Pay off your debt. Not only will this give you more disposable income and allow you to save more over the long term, but a good credit score will enable you to qualify for better terms on a home loan.

• Create a budget and stick to it no matter what.

• Deposit any “extra” income, such as a bonus or salary raise, into your savings account, instead of using the extra money to enhance your lifestyle.

• Preferably save into an account where you have to give notice before you can withdraw your money. This will make you think twice before making a withdrawal.

• Have a separate emergency fund, so that you won’t be tempted to use your savings in a crisis.