Hello dear community,
My girlfriend and I, 19 and 21 years old, want to fulfill the dream of owning our own home someday. (Please no comments like “grow up first,” “see if you stay together,” etc.). We have been together for 5 years and both started our vocational training this year. We would like to build a house in our early 30s if everything goes well and want to start saving money now to make that possible. Together, we could save 800€ per month (about 880 USD) in the first year of training, and 1,000€ (about 1,100 USD) in the second and third years. After that, we plan to save a bit more, around 1,200€ (about 1,320 USD) per month. Our saving period would be about 7 to 8 years.
Now the question is what the best way to save the money is: a building savings contract (Bausparvertrag), a high-yield savings account, or an investment account, although the latter requires considerable knowledge (I have only done some preliminary reading). I think many here have extensive experience and can give us helpful advice, which we would really appreciate. We would also like to remain flexible with the money, meaning that if something comes up in those 7 to 8 years and we don’t end up buying a house, we don’t want to owe money or face penalties due to fixed terms or conditions.
As I said, I’m very inexperienced and only just starting to look into this topic.
Thanks in advance for the help and tips. If you need more details, please let me know—I’m not sure which information is relevant in such cases.
My girlfriend and I, 19 and 21 years old, want to fulfill the dream of owning our own home someday. (Please no comments like “grow up first,” “see if you stay together,” etc.). We have been together for 5 years and both started our vocational training this year. We would like to build a house in our early 30s if everything goes well and want to start saving money now to make that possible. Together, we could save 800€ per month (about 880 USD) in the first year of training, and 1,000€ (about 1,100 USD) in the second and third years. After that, we plan to save a bit more, around 1,200€ (about 1,320 USD) per month. Our saving period would be about 7 to 8 years.
Now the question is what the best way to save the money is: a building savings contract (Bausparvertrag), a high-yield savings account, or an investment account, although the latter requires considerable knowledge (I have only done some preliminary reading). I think many here have extensive experience and can give us helpful advice, which we would really appreciate. We would also like to remain flexible with the money, meaning that if something comes up in those 7 to 8 years and we don’t end up buying a house, we don’t want to owe money or face penalties due to fixed terms or conditions.
As I said, I’m very inexperienced and only just starting to look into this topic.
Thanks in advance for the help and tips. If you need more details, please let me know—I’m not sure which information is relevant in such cases.
I can only speak from my own experience—I started out with a capital life insurance policy, a building savings contract, and a targeted savings plan right after completing my training. The last one is no longer available under the excellent conditions I had back then (I receive 50% interest on the annual savings amount...), so I’d skip that now. However, I would definitely recommend getting a building savings contract per person, possibly also for the capital-forming benefits. It doesn’t have to be very large, as bigger contracts tend to be quite expensive. But at least 30,000 (about 66,000 dollars) per person would give you a solid foundation, and over the years that can add up to a good amount.
But don’t make the mistake of locking away all your “free” money—always keep an emergency fund in a savings account (or even at home under your pillow, which currently earns about the same interest...). Also, set up smaller piggy banks for loose change or occasional ten-dollar bills—for a new car, a holiday, gifts... And most importantly, enjoy life 🙂
But don’t make the mistake of locking away all your “free” money—always keep an emergency fund in a savings account (or even at home under your pillow, which currently earns about the same interest...). Also, set up smaller piggy banks for loose change or occasional ten-dollar bills—for a new car, a holiday, gifts... And most importantly, enjoy life 🙂
Hats off to your mindset. Still, I would recommend something different. Take advantage of your financial opportunities and explore the world. Travel, do an internship abroad, etc. This is very valuable for your personal development.
If you later manage to get a good job, you will save tens of thousands very quickly and can then start thinking about your dream house.
If you still don’t want to listen to me and prefer to save for a house, then I would simply take the money and put it in a savings account. Do not invest it.
If you later manage to get a good job, you will save tens of thousands very quickly and can then start thinking about your dream house.
If you still don’t want to listen to me and prefer to save for a house, then I would simply take the money and put it in a savings account. Do not invest it.
I can easily imagine that your generation is lucky enough for the end of the property boom to coincide with the time you plan to build. You might not even need to build at all because there could be plenty of attractive and affordable options on the market. Who knows...
The key is to handle your money with discipline from the start while still allowing yourself some treats. The years between 20 and 29 are simply the best and don’t come back. At that age, I wasn’t willing to live ascetically.
From around 28 or 29, when parties start happening less often, I would recommend skipping some vacations and saving that money instead. Future homeowners will thank you for it.
The key is to handle your money with discipline from the start while still allowing yourself some treats. The years between 20 and 29 are simply the best and don’t come back. At that age, I wasn’t willing to live ascetically.
From around 28 or 29, when parties start happening less often, I would recommend skipping some vacations and saving that money instead. Future homeowners will thank you for it.
B
Bieber081517 Nov 2018 20:38It would be interesting to know more about your family background and financial education. (I’m not expecting an answer; we just wanted to highlight this aspect.)
My notes:
- Income helps. Focus on your professions. Work hard, complete your education above average, find good jobs, be willing to be mobile if necessary, and consider further education (higher degrees) if possible.
- Every euro not spent counts much more than the best savings plan. So avoid unnecessary consumption. Major cost drivers are housing and cars. Then there are all the regular expenses (phone contracts, gym memberships, subscriptions of all kinds—they add up).
When it comes to finances:
- Basic coverage. Health insurance, personal liability insurance, and disability insurance if needed. A young person doesn’t need more! No private pension plans, no contents insurance, no legal protection insurance, or anything like that. Also, keep an emergency fund of 2-3 net monthly salaries in a high-yield savings account (so you never have to pay overdraft fees).
- Stay frugal. Question the costs for every financial product. Checking accounts, high-yield savings accounts, and credit cards can be free of charge. You should also save money initially without fees (which rules out home loan savings contracts).
Saving:
Stocks could be an option over 10 years, in my opinion. The best way is through a cost-free investment plan in a global ETF (which still has low fees, of course). However, simpler, tax-efficient, and especially more flexible are regular savings accounts. These include high-yield savings accounts, fixed-term deposits (or combinations thereof), or bank savings plans. Avoid insurance products! Their costs are too high.
My notes:
- Income helps. Focus on your professions. Work hard, complete your education above average, find good jobs, be willing to be mobile if necessary, and consider further education (higher degrees) if possible.
- Every euro not spent counts much more than the best savings plan. So avoid unnecessary consumption. Major cost drivers are housing and cars. Then there are all the regular expenses (phone contracts, gym memberships, subscriptions of all kinds—they add up).
When it comes to finances:
- Basic coverage. Health insurance, personal liability insurance, and disability insurance if needed. A young person doesn’t need more! No private pension plans, no contents insurance, no legal protection insurance, or anything like that. Also, keep an emergency fund of 2-3 net monthly salaries in a high-yield savings account (so you never have to pay overdraft fees).
- Stay frugal. Question the costs for every financial product. Checking accounts, high-yield savings accounts, and credit cards can be free of charge. You should also save money initially without fees (which rules out home loan savings contracts).
Saving:
Stocks could be an option over 10 years, in my opinion. The best way is through a cost-free investment plan in a global ETF (which still has low fees, of course). However, simpler, tax-efficient, and especially more flexible are regular savings accounts. These include high-yield savings accounts, fixed-term deposits (or combinations thereof), or bank savings plans. Avoid insurance products! Their costs are too high.
Absolutely great mindset at a young age. Saving is an excellent habit, and the earlier you start, the better. Generally, it is advisable to have 2–3 months’ net salary saved in a savings account to cover short-term needs. If you feel mature enough and, above all, disciplined, I would recommend opening a free investment account and setting up a few savings plans (actively managed funds, ETFs, stock savings plans). It is important not to arrange these through overenthusiastic financial agents or representatives (sales charges, commissions). Furthermore, once you finish your apprenticeship, you might consider a large joint home savings contract. Personally, I am currently not in favor of home savings plans due to the interest rate situation, initial fees, and account maintenance charges. Also, it’s wise to think about disability insurance early on. If you each receive an employee savings allowance, invest it in a dedicated equity fund savings plan and take advantage of the employee savings bonus. As for retirement planning, I would suggest postponing it until after your apprenticeship and enjoying life in the meantime.