How investing can help you save for a house deposit

Saving for a home deposit is daunting. It's hard to know how much you really need, how much you can afford to save, let alone the whole process of finding the perfect home. And as house prices continue to soar, it's likely that you might need to set aside more than you expected when you started saving.

The median house price in Auckland at the time of writing is $1,132,552. Therefore it's likely that most people would need to find a spare $113,255 for a 10% deposit on the average house in Auckland.

How investing can help: a case study

Assuming you started saving when you were 25 years old, that requires saving $11,300 a year, to be on track to buy a house when you're 35. But oh wait, house prices have gone up 127.78% in the last 10 years. That average Auckland house may now cost $1,449,666 in the time you've been patiently saving.

That's a $30,000 shortfall in your deposit.

There's no doubt that the housing situation in New Zealand is not good for first home buyers, and we aren't arguing that it is. But one of the ways you can ensure that you aren't caught out, is by investing some of your savings.

Kiwisaver is a great tool for saving for your first home, but it's only one of the ways you can invest. Investing in funds yourself on top of your Kiwisaver gives you greater flexibility - you can easily add more when you have the funds, and skip payments when you're really skint.

And investing extra alongside Kiwisaver can go a really long way. If you save for your house deposit in a normal savings account, you might receive 0.5% interest. But if you invest in a fund, you could be earning, on average, 3-10% interest depending on the fund you choose.

Over 10 years, that's a huge difference. Let's say you set aside that $11,300 per year to save for your first house.

If you left the money in your savings account, over 10 years you would likely have $116,154.58 in your account. Pretty good right?

But if you invested in a conservative fund like Sugarwallet's Cautious fund, you would be projected to have around $144,212.89.

And if you were okay with a bit more risk, and invested that same amount in Sugarwallet's Growth fund, you would be projected to have a whopping $198,781.40. That's around 5 extra years worth of saving, with 0 extra effort.

It's a no-brainer to use investing as a tool to help grow your savings. Although there is risk involved in investing, there's unlikely to be more risk than investing in kiwisaver - as Kiwisaver is just a managed fund that you can't dip into.

So if you want to boost your first home deposit, without all the fuss - download the app today. We are launching with our first customers later in the month, so sign up now to be invited to early access. We can't wait to help thousands of Kiwis turbocharge their savings, and get on track to buy their dream home.