Best way to save for a house?

[OneOfTheseDays]

I've been looking at various CDs but the return is so unbelievably low (1-2% at best) that it's practically not even worth it. Are there any other decent alternatives that I can put my money into for the next 3-4 years? Thanks.

 

[ThatsABigOne]

Do not go out for food. Make it yourself.

 

[Arachnotronic]

I've been looking at various CDs but the return is so unbelievably low (1-2% at best) that it's practically not even worth it. Are there any other decent alternatives that I can put my money into for the next 3-4 years? Thanks.

Buy a high dividend yield stock, like VZ or T. they pay ~6% and you're probably going to see some return on the actual stock price side, too.

 

[Svnla]

Reward checking accounts FTW.

They are not perfect (about 30 to 25K limit or less, have to do several things to earn the rate) but they have the best rates for FDIC insured accounts.

 

[edro]

Roth IRA
You can take early withdrawal for house purchase without penalty.
The only problem is the limit is $10k.

 

[ichy]

Rewards checking is the best you can do. Stocks are a long term investment and not an appropriate way to save money that you're going to need in the next couple of years.

 

[HydroSqueegee]

Do not go out for food. Make it yourself.

i cant agree more with this statement. fast food and dine in places will fuck you over in the long run.

 

[Tweak155]

If it is your first house, I'd buy a cheap one (cash) and live in it 5-10 years. You're bound to make money on it (or at minimum, not lose any) and you'd have a nice check to put towards the house you really want, not to mention the additional money you saved during that time of not paying rent or a mortgage.

Also don't eat out

 

[HydroSqueegee]

If it is your first house, I'd buy a cheap one (cash) and live in it 5-10 years. You're bound to make money on it (or at minimum, not lose any) and you'd have a nice check to put towards the house you really want, not to mention the additional money you saved during that time of not paying rent or a mortgage.

Also don't eat out

eeh... houses can be a money pit. shit starts breaking, then the next thing you know your ass deep in a hole you cant get out from. And god forbid if you CANT sell your place.

 

[bignateyk]

I've been looking at various CDs but the return is so unbelievably low (1-2% at best) that it's practically not even worth it. Are there any other decent alternatives that I can put my money into for the next 3-4 years? Thanks.

How much are you looking to save? There are rewards checking programs that still offer 3-4% up to like $20K. Mine used to be 5% but has since dropped to 3%. I keep $20K in it as my emergency fund since it gets decent interest.

 

[overst33r]

total bond fund such as VBMFX

not as liquid as rewards checking, but also not as many requirements (direct deposit/debit purchases,etc), higher return as well, though not 100% guaranteed.

 

[Tweak155]

eeh... houses can be a money pit. shit starts breaking, then the next thing you know your ass deep in a hole you cant get out from. And god forbid if you CANT sell your place.

Buying a house is always a risk. The gamble you're taking here is whether or not the stuff that breaks will surpass what you <would have> paid in rent. Over 5 years it is very not likely that your costs will outweigh your rent, especially if you buy a CHEAP house as suggested.

5 years rent even at a piddly $500 a month is $30,000. Even if you bump that up to $750 (pretty reasonable if you shop around) thats $45,000 in rent. If you DID spend all that money to fix up your house, it could even add value to your sale price, whereas rent will go out the window.

The real difference here is you have a good chance to get your money back + some (especially if you are making those repairs), whereas with rent it is guaranteed out the door. Even if you can't sell it, you have other options such as renting it out.

 

[manimal]

I saved for a house by buying the cheapest possible efficiency I could get in chicago RIGHT out of school. I then built up that equity till I could afford a 1 bed. After that I went with a 2 bd condo then house.

Its alot easier to save when your already building equity.

 

[the DRIZZLE]

I recommend that you spend less than you make and invest the difference in a security that offers an attractive risk adjusted return. You're welcome.

 

[biostud]

real estate

 

[Vic Vega]

American Express has a decent savings account. I use it for short term savings. Do yourself a favor and have the money direct deposited there so you never see it.

 

[unokitty]

If you are considering a bit of risk, you might consider a company that offers a dividend paying stock that has a dividend reinvestment plan.

Advantages being that it minimises the fees associated with acquiring the stock. As your dividend is automatically reinvested, it also minimises your efforts.

Disadvantages include that your gains are not guaranteed. That means, that the dividend may go up or down. Also, the stock price may go up or down. And you have to pay taxes on your gains.

With some research, you should be able to minimises your risks.See:

http://en.wikipedia.org/wiki/Dividend_reinvestment_plan
or
http://www.fool.com/dripport/whataredrips.htm

Best of luck,
Uno

 

[slayernine]

1. Have children
2. Send them to the mines
3. ...
4. Profit (buy house)

 

[JTsyo]

I would feel comfortable with my money in the market for the next 2-3 years. Maybe something like SDY to spread it out while still getting some dividends. Just be sure to pull it out a while before you start looking for houses, in case it tanks once you get close.

 

[Corporate Thug]

I agree with overst33r...bond fund is the best way to go if you want a balance of safety and reasonable return.

 

[Elbryn]

I agree with overst33r...bond fund is the best way to go if you want a balance of safety and reasonable return.

just be aware there is risk involved. for each 1% interest rates rise, you lose roughly the average duration of years in percent in the bond fund purchase price. with where interest rates are, rising rates are a definite possibility.

with a short time span of 3-4 years, be wary of risks and be willing to delay if something adverse occurs.

 

[amish]

just be aware there is risk involved. for each 1% interest rates rise, you lose roughly the average duration of years in percent in the bond fund purchase price. with where interest rates are, rising rates are a definite possibility.

with a short time span of 3-4 years, be wary of risks and be willing to delay if something adverse occurs.

is there another avenue that you would recommend? i didn't think about the risk with interest rates increasing.

edit: the reason i'm asking is that i'm hamstrung with independence requirements and the bond fund mentioned was an authorized investment fund.

 

[gbeirn]

Roth IRA

 

[OneOfTheseDays]

Good advice so far guys.

So far it looks like my options are:

2-3 year CDs or savings account: 1-2% yield
Pros: Guaranteed return
Cons: Very low return

High Dividend Stock: Anywhere from 3-10% yield
Pros: Much higher return
Cons: Not guaranteed, gains are taxed when withdrawan

If I wanted to learn more about these high dividend stock reinvestment plans where would be a good resource?

 

[The_Dude8]

1. Have children
2. Send them to the mines
3. ...
4. Profit (buy house)

kids are a money pit for the parents.