The cost of living isn’t getting any cheaper so if you’re saving up for a home deposit you might feel like you’re running an impossible race. The good news is that by saving smartly, you can outflank inflation and property prices. You can even raise a sizeable deposit in half the time you may have thought possible. You have two main ways to get your house deposit together — saving more money or spending less money or, ideally, both if you’re dead-set on home ownership any time soon. These tips could help you to build that deposit—brick by brick. Create your budget Examine bank statements to see where all your money goes and look for things that you can eliminate or reduce comfortably. Start with the low-hanging fruit like your coffee and cake habit, for example. If you tend to grab this combo on your way to work four or five days a week, cut it to twice a week. Do you go to the cinema twice a month out of habit, even if you don’t really fancy the film? If so, go just once a month instead and stash the savings. Getting together a sensible budget should take you no more than a couple of hours. It might seem a bit painful at the time but identifying and then reducing those occasional little luxuries (that are neither occasional nor little in price) means more money left at the end of each month. This is money that you can start investing in term deposits. Attack your debts Most of Australia’s households have debt, mainly in the form of credit cards, and the amount of debt per household is rising. It’s easy to understand why, when you can order cabs, Ubers, takeaways and all those other not-quite necessary items with a few taps. Of course, credit cards are useful when it comes to emergencies or sudden bargains, but if you’re paying for treats, non-essential shoes and rounds of drinks with yours, you need to rein it in. You can’t save effectively if you’re paying down your credit card and its interest. Concentrate on making bigger credit payments for a few months so that you’re being charged less interest, then put your savings into the best term deposit Australia has to offer you. Oh, and let someone else get the next round… Get the best out of your banking Look at your bank accounts. Are you getting the best interest rate possible on your savings accounts? Are you paying monthly fees that you could eliminate by switching to a different account or a different bank? What about your everyday transaction account? Are you paying monthly fees? Are you charged for certain transactions or excess transactions? When you’re undertaking a project like saving for a house deposit, your money is very precious, so you shouldn’t use any old bank account, even if you’ve been with that provider for years. Here’s the checklist for making sure your deposit account is the best one out there. How often your interest is calculated You want an account which calculates interest daily, as accounts that pay monthly calculate the interest on the minimum balance that month. How often the interest is paid? The higher the frequency, the better, because if the interest is being added to your balance more often, you’ll have more in there to compound on itself. Whether the account is “stepped” Lots of banks have deposit accounts that pay the full amount of interest on every dollar in them (this is what you want). Other accounts have a structure that means different interest rates on the different portions of the money. For some people (the ones with big balances), this works out well, so do the maths before committing to a particular account. What charges are on the account If you’re getting charged for making withdrawals (or even deposits), then you need to shop around for an account that offers at least some free transactions. Another solution here is to pay your regular bills with automatic debiting, you can also use EFTPOS to withdraw cash for shopping as this is seen as only one transaction. Take your savings to the next level When you have that first few thousand dollars in your account, it’s time to get serious with it. You need to look for a good term deposit account. Usually, you won’t have the same easy access to your money as you would do from your at-call account, but you’re in it for the interest rates, not the spending money. With a term deposit account, you essentially lock your money up for a pre-agreed term and it accrues lots of lovely interest while it’s captive. You can get to your money in an emergency, but you’ll probably pay a fee for making an early withdrawal. Save on rent by moving in with the ‘rents With the average rental on a two-bedroom unit in central Brisbane nudging $500 a week, it makes sense to reduce those costs. One good way is to move further out of the city if possible, but the best way is to pay much less rent by moving in with your parents for a while. Even if you pay them $100 a week for a year, you could be saving up to $20,000 as a couple. Bonus tips Start saving now. It doesn’t matter how much you start with, as long as you start. Keep looking for ways to cut corners and get discounts on your everyday expenses then plough these savings into your fund so that compound interest can work its magic. Work out how much interest you could earn using our compound interest calculator. Aim for a minimum of 20 per cent of your purchase price, otherwise you’ll have to pay Lenders Mortgage Insurance. Remember, it’s a marathon, not a sprint! The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.