University graduate on how she saved $56,000 for a first home by age 23

Having bought a 2-bedroom house in Hamilton in March, Simran Kaur shares how she managed to save a deposit of $56,840 by age 23.
Having bought a 2-bedroom house in Hamilton in March, Simran Kaur shares how she managed to save a deposit of $56,840 by age 23. Photo credit: Supplied.

A Kiwi woman who by the age of 23 managed to scrape together a $56,000 deposit for a first home in Hamilton says it took a year of strenuous saving.

As a single person with no dependents, her situation is unique - she was able to save a lot of money in a short space of time. But she's sharing her story to give other young people ideas on how to start - and to highlight the extent first home-buyers are having to save, to get onto the property ladder.

It comes as a shortage of property listings continues to drive up house prices despite the Government announcement tipped towards helping first home-buyers. June figures show average asking prices were up over 20 percent on the same time last year, with 16 of 19 regions showing 14-year record highs.  

Fresh out of university in her first graduate job at the onset COVID-19, Simran Kaur was focused on buying a "starter house" on her own. In March 2021, she bought a freestanding, 2-bedroom brick house in Hamilton, using her deposit of $56,842, being just over 10 percent of the purchase price of $560,000.

"I had a 10 percent deposit and it took me about a year of strenuous saving to really get there in the end," Kaur said.

Financially savvy, Kaur, who runs an investing podcast for women called 'girlsthatinvest', said her deposit (excluding KiwiSaver), was saved over the year from March 2020 to March 2021. It consisted of three components:

  • Existing KiwiSaver savings of $8902. 
  • Personal savings of $28,629 (total saved in an online savings account).
  • Share investing of $19,311 ($14,581 invested, plus estimated profit over the year of $4730).

Working full-time in healthcare and living with students out of the city "where rent is slightly cheaper", Kaur says she took on online side hustles to supplement her income. Her flatmates were students who, like her, wanted to cut living expenses down and cooked cheap meals at home. 

Having made a detailed list of everything she spent money on, Kaur says she tried to spend money on things that brought her value, such as "hanging out with friends", and not spend on things that didn't, like "buying takeouts".

She made herself think about purchases for a few days beforehand. On one occasion, she waited two-to-three months before spending $13 on a T-shirt.  

"I would budget about $70 on groceries a week and try to incorporate spending time with my friends in ways that didn't cost money like holding potlucks instead of going out to dinner," Kaur said.

As someone who didn't feel nervous about the value of her money going down, she was willing to take a few risks to grow her deposit further. Despite having a timeframe of around a year to invest (less than the recommended minimum of three-to-five years), when share prices took a hit during COVID-19, that's when Kaur started putting spare money in.   

"I had a high risk appetite so I'd been investing a lot of my money into the stock market in passive index funds and a few individual stocks," Kaur said.

Her deposits weren't the same every week. At the start of 2020, she says she put more money into shares and less into cash. As markets recovered - and to protect her savings - towards the latter part of the year, she put only a small amount into shares, putting most into her online savings account.

"I wouldn't do it again....I invested at the bottom of the market in March 2020 (which was by sheer luck as no one can predict when the bottom actually is occurring)," Kaur said.

"My most profitable investment was Tesla which had about a 300 percent growth," Kaur added.

After getting her finance pre-approved in December last year, she says she did "a lot of research", attending around 40 open homes before finding the one she wanted to buy.

"I know my situation isn't one of a typical first home buyer and in all honesty it shows the state of the market that a single person cannot save with a job alone to be able to afford a home in New Zealand," Kaur added.

For those wanting to save a deposit over the next few years, Lisa Barton, first home specialist at Money Empire, suggests using KiwiSaver to help grow savings. Those already in KiwiSaver could consider increasing their individual contributions.

"I'd suggest increasing KiwiSaver contribution[s] to the maximum 8 percent and also set up a regular [payment] for 'house savings'," Barton said.

To help protect savings from market volatility, it's also a good idea to check the KiwiSaver fund is set at the right level of risk. 

Having released a 2021 investor confidence survey in July showing confidence has risen, a Financial Markets Authority (FMA) spokesperson said during COVID-19 when markets were volatile, many Kiwis joined online investing platforms for the first time. As a result of the COVID-19 market rebound, investors may have seen very positive returns.

But people, including first home-buyers considering using share investing to help grow their deposit, should bear in mind there are risks and shouldn't invest more than they can afford to lose.

As they're considered higher-risk, a typical timeframe for investing in shares is 10-plus years.

"It can be tempting to try to accelerate your first home deposit savings, but higher-return investments always come with higher risks, the FMA spokesperson said. 

"We encourage people to consult a financial adviser - especially if they have a considerable amount to invest - and thoroughly research prospective investments so they're fully aware of the risks, potential returns and fees."