A down payment on a home is an investment in your future. In fact, it may be one of the biggest investments you'll ever make. So what's the best way to save?
Three tips to save a down payment
1. Keep the money apart from your other savings. That way, you'll be less likely to spend it.
2. Find a way to grow your money safely. You don't want to wake up a month before you plan to buy your home and find you have lost money due to a drop in the stock market.
3. If you're a first-time buyer, you might want to save for a down payment in a Registered Retirement Savings Plan (RRSP). Under the government's , you can take up to $20,000 from your RRSP for a down payment on your first home.You won't pay any tax on the money as long as you pay it back over the next 15 years.
What are some safe places to invest while I save for a down payment?
- High-interest savings account Every time you get paid, you can put some money into this account. When you're ready to buy, you can easily get your savings out. For some people, that's not a plus, however, because it's a little too easy to take the money out and spend it on something else.
- Guaranteed Investment Certificate (GIC) As your savings grow, you may want to buy GICs. If you think you'll be tempted to spend some of your savings, you can lock your money in with a GIC so that you can't easily get at it.
- Canada Savings Bond (CSB) The federal government offers CSBs to investors at certain times each year. They pay minimum interest and you can invest as little as $100. One type of CSB is cashable any time. Certain provinces also offer provincial savings bonds.
- Money market fund A money market fund is a mutual fund that invests in safe, short-term products. The fund is run by a professional investment manager who invests the money for you. You can get your money quickly and easily, usually within 24 hours. However, like other mutual funds, there are fees to pay for having your money in the fund. There may also be fees for taking your money out.
Remember: It takes time to save up a down payment
You can speed up the process if you invest your money so it will grow. Just don't take more risk than is comfortable for you
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.