1. Budget, budget, budget
The key to any long-term savings plan is budgeting - so you need to get it right from the very start.
Gather together all of your bank statements and bills and use them to draw up a list of your monthly income and outgoings. This should help you to assess how much you can afford to save each month.
If the figure you arrive at seems a little low, it’s probably a sign you need to make some cutbacks.
So consider whether you really need to keep paying for your gym membership or magazine subscription and whether you can reduce how much you spend on meals out.
Simply cut out what you don’t need and stick to it.
2. Make your savings work harder
Once you’re saving money each month you need to find a good place to put it.
Your first port of call should always be a cash ISA as the interest you earn will be tax-free. In the current tax year (until April 6, 2016), you can save up to £15,240 in to a cash ISA.
From December this year, first-time buyers will be able to save for their deposit in the new Help to Buy ISA
You’ll be able to save up to £200 a month in to a Help to Buy ISA and the government will top up your contributions by another 25%. So for every £200 you pay in to your account, the government will pay in another £50.
The maximum you’ll be able to save in to your ISA is £2,400 a year, although in the first year you can open your ISA with an extra £1,000, onto which the government will add £250.
The maximum amount the government will contribute is £3,000 – you’ll only receive this if you’ve paid in a total of £12,000.
Another good savings option is a regular savings account as this allows you to pay in a set amount each month for up to a year. Interest rates are usually pretty competitive, but be aware you’ll need to leave your money untouched for the 12-month term (and remember this isn’t a tax-free account).
3. Reduce your rent
If you’re renting a property with a spare room you might be able to lower your monthly costs by taking on a lodger. This will help with your rent and mean you can put the extra money into your savings account.
Under the government’s Rent a Room Scheme you can earn up to £4,250 per year tax-free from renting out a room – this will increase to £7,500 from next April. You can read more about this here.
However, before you start advertising for a lodger, check with your landlord or lettings agent first as there will be conditions in your contract regarding sub-letting.
Alternatively, you could move into someone else’s spare room, find a cheaper property to rent while you’re saving, or even move back in with your parents – it probably won’t be ideal, but remember it’s only for the short-term and it will be worth it in the end.
4. Shop around for a better deal
Doing so could save you hundreds of pounds a year and all of this can go towards your house deposit.
5. Explore Help to Buy
If you’re still struggling to scrape together a decent deposit, don’t despair.
The government’s Help to Buy scheme is aimed at helping those with a deposit of just 5% get on the property ladder.
There are two parts to the scheme.
The Equity Loan scheme is open to both first-time buyers and homemovers, but is restricted to new builds.
You’ll only need to raise a 5% deposit and the government will fund a further 20% through the Homes and Communities Agency. This means your total deposit will be 25%, so you’ll have access to more competitive mortgage rates.
For the first five years, the government’s 20% loan will be interest-free. After that you’ll be charged 1.75% interest which will increase at a rate of 1% of that figure plus any increase in inflation as measured by the Retail Prices Index, every year thereafter.
The second part of the scheme – the Mortgage Guarantee scheme – is again open to first-time buyers and homemovers, but applies to existing homes as well as new builds.
Buyers only need to raise a 5% deposit and the government will provide a guarantee to the mortgage lender for up to a further 15%.
You can read more about the schemes here.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.