SHARES

Share portfolio to build a home deposit

By

For those building a house deposit, bank shares have favourable links to house prices.

Owning a home is the most common financial goal I hear from people. It's a sensible aim but also one that many young people feel is slipping from their reach, as prices in many major capitals continue to rise. The "fear of missing out" is almost palpable.

The most straightforward way of building a deposit is to sock away savings year after year. At some point, you'll hopefully have enough to afford a cliche. You know the ones, like "establishing a toehold in the market" or "getting on the property ladder".

House deposit

I'm a fan of simplicity when it comes to financial strategies. If you're able to save a decent amount each year, say $10,000, then you're almost certain to pull together enough for a deposit for an entry-level property in a few years.

That certainty can make the sacrifices needed to save the money a little more palatable - strategies like living at home for a few more years or forgoing holidays.

With interest rates on bank deposits very low, this is truly a "sweat-of-your-brow" plan. Setting aside $10,000 a year for seven years with interest rates at only 3%, you'd end up with a little less than $77,000. Having put in $70,000 of that yourself, the earnings on your capital would have contributed less than 10% of your final house deposit.

Perhaps there's a better way? Greg Hoffman offers several scenarios for those building a house deposit.

To continue reading Greg's column, grab the September issue of Money Magazine from your local newsagent or supermarket or subscribe here.

RELATED STORIES

Greg Hoffman is a non-executive chairman of Forager Funds Management and is an independent financial educator, commentator and investor.
Post a comment
Link to something EkwsMq4Z