Google knows your money-saving woes.
It’s financial literacy month, so search engine Google GOOG, +0.20% has released its list of the most-Googled personal finance questions, including the questions they get on saving money. The No. 1 “how to save for” question Google got over the past year (in the U.S. from March 2018 to March 2019): How to save for a house. (And two other questions — 6 and 7 below — are also likely related to homeownership.)
Top 10 “how to save for” questions people asked Google in the past year
1. How to save for a house
2. How to save for retirement
3. How to save for a car
4. How to save for college
5. How to save for a wedding
6. How to save for a down payment
7. How to save for an apartment
8. How to save for a vacation
9. How to save for kids college
10. How to save for retirement at 40
Why people are asking about home ownership
And it makes sense, seeing as how the homeownership rate in America — meaning the proportion of owner-occupied households — has been on the decline for roughly the past 15 years. Now fewer than two in three Americans owns a home. Add to that the fact that roughly three in four Americans who don’t currently own a home say they want to own a home — and you can see why saving for a home is such a popular question for Google.
At the same time, half of Americans who have pursued buying a home say they’ve faced barriers, according to a survey released in April by the National Foundation for Credit Counseling. Cost is the biggest factor — with the No. 1 barrier being rising home prices and the No. 2 barrier being lack of savings for a down payment or closing costs, the survey revealed.
Indeed, in 2018, prices rose nearly 6% from the prior year — and many predict there’s more price appreciation to come; some markets have hit record high prices. And as home prices rise, down payment requirements from lenders — which are typically a percentage of the purchase prices — also rise.
Plus, “saving for a home can be an especially challenging goal, because other needs like student loan debt or paying down credit cards demand more urgent attention,” adds certified financial planner Bobbi Rebell, host of the Financial Grownup podcast and co-host of the Money in the Morning. Indeed, student loan debt hit a record high in 2018, as did credit card debt.
How to save: first, figure out how much house you can afford
So how do you save for a home even in this tough market? “Start with how much you can afford…truly afford,” says certified financial planner Mitchell C. Hockenbury of 1440 Financial Partners. Determine the purchase price of a home you can afford (this calculator can help); then look at what the down payment (it’s typically between 3% and 20% of the purchase price), closing costs and other costs you might accrue (this is a good resource) are. “Don’t forget lawn/snow maintenance and the actual maintenance of the home (new roof, HVAC, etc.),” Hockenbury says.
‘Automate and separate’
Then, make a savings goal based on those costs (down payment, closing and other costs), and “break the goal into smaller goals,” says Trish Tetreault a financial analyst at FitSmallBusiness.com . Once you’ve done that, start saving. “The best way to get it done is often the most boring: automate and separate,” says Rebell. So you should automatically save a certain amount of each paycheck in a separate savings account for your home. “Even if you start small, seeing the balance build up in a separate account will likely motivate you to keep it going,” she adds.
She notes that you should beware of your timeline when picking where to plunk your savings: “If you want to buy a house in the next 5 years, make sure any investments you make are conservative so the money is there when you want it. For example, a CD might make sense. Investing in individual stocks probably is not the best idea, even though you might be giving up gains.”
Trim expenses
And Tetreault adds that if you want to save even more quickly, look for ways to cut expenses. “Are there monthly subscriptions that you can eliminate or reduce? Can you cut back on your entertainment spending? Reducing your current expenses will allow you to save more towards your goal,” she says. You should also see if there are opportunities to make some extra cash: “Do you have things that you no longer use that you can sell? Can you pick up overtime hours? Would a part-time or freelance job provide you with enough additional income to reach your goals?,” she says.
Shares of Google have been up 16% this year, compared to a 12% increase for the Dow Jones Industrial Average DJIA, -0.05% and a 15% increase for the S&P 500 SPX, +0.00%
