Saving for a down payment can be daunting for first-time home buyers, but breaking it down into small steps can make the process less daunting. A home is a great investment, and there are many ways to save for this big purchase.

A potential home buyer should try to save 5-20% of the value of the home. Here are some helpful tips for saving for your dream home.

  1. Let Your Money Grow

    2. Hold your savings in a fund where they can accumulate the highest possible amount of interest. Good examples of accounts include:

    • Canadian Tax Free Savings Account (TFSA)
    • Guaranteed Investment Certificate (GIC)
    • Mutual Funds
    • RRSP
    • High Interest Savings Account

  2. Pay off Existing Debt

    3. It’s hard for your money to grow when you owe–and are paying interest. In fact, those who have too much consumer debt will not qualify for a mortgage. Before starting to save for a down payment, address existing debt. If you feel overwhelmed by this project, just take it slow.

  3. Downsize

    4. Examine your current lifestyle to see if there are any areas in your life where you can downsize or cutback. Not only can this help you save for a down payment, it can also help you pay off existing debt and not accumulate more.

    Look where you’re spending your money. Are you:

    • Going out a lot?
    • Buying pricey new clothes every season?
    • Indulging in expensive vacations?
    • Buying all the latest technology?

    Once you identify where you are overspending, try to put yourself on a budget. Even small compromises in your lifestyle can have a snowball effect, and accelerate your saving process. For instance:

    • Eating out a lot? Going out to restaurants can become very expensive. Perhaps you go out for dinner once a week. Try cooking at home and cutting back to just going out once a month.
    • Shopping too much? Take stock of what you already have, and only spend money on things you absolutely need. Maybe you really want a new spring jacket, but if you already have a perfectly good one, that money should be going to your savings.
    • Pricey vacations? Look for getaways that are closer to home, or keep an eye out for cheap flights and trip deals.

When it comes to saving money, the little things really make a difference. It may seem like a sacrifice, but it is one that will pay off down the road. There are many ways to be creative when it comes to saving money, and once you find the way that’s right for you, you’ll be well on your way to becoming a homeowner!