Should You Keep Your Down Payment in Savings or Invest It?

Next up, we've got a question from Whitton Evan. It says, "Hey friends, we're saving for a house. At what point is it better to put the money in the market versus a high-yield savings account?" So, part of the question is saving for the down payment, yes, and I've heard you guys say, "Okay, if you're saving for a down payment, park it in the high-yield savings account." Right now, high yields, I'm going to say this, we always...it's funny; you have to tell about the comment in a second. Right now, high-yield savings accounts are paying like four and a half, five percent, so that's amazing right now, right? Uh, and so that's a great place to park cash. But you've also heard us say, if the timeline is uncertain, right, like we're saving for a down payment but we don't know when, we don't know what part of the country, maybe it's in five years, six, seven years, we ask you to assign some probabilities. If it is a high probability that the down payment is going to happen inside the next five years, the next 60 months, I think the cash is your friend. Just start loading up that high-yield account, and thank goodness right now you can earn five percent on that, which is amazing. If the probability of it happening inside of the next 60 months is fairly low because you don't know when you're going to start a family, and you don't know what part of the country and job situation, and you want to save for a down payment, but that down payment might not be for six, seven, eight years in the future, I don't think it's crazy to use something like a low-cost index fund or a Target date retirement index fund to start building up those dollars, or my personal favorite, you can do some of both. Build up your cash a little bit extra, even above and beyond your emergency reserve, but also start buying that low-cost index fund through a dollar cost averaging strategy or that Target retirement index funds or a dollar cost averaging strategy, and when it's time to purchase, you're gonna be able to pull from both of those pots, and assuming the market has performed well, you'll have a little bit extra in there to help you with that down payment. Yeah, I mean, I don't vary too much. I think, you know, if the purchase is inside of three to five years, cash, especially because cash is paying over five percent in a lot of cases now. Greater than five years, still probably gonna have a big chunk in cash, but I'd diversify into some other longer things, see if we could, you know, juice those returns a little bit better, but don't get too cute if it's within that five-year period. Now, what Bo was alluding to, this is a great comment that came through because you said high-yield savings. If you wonder if we read the YouTube comment, we definitely do. We do, all right. I'll send it around. What I do is when I'm thinking about responding, and sometimes I just send it to the team because they... They know I have an addiction. I thought I was a troll whisperer for a little bit. I realized I'm not necessarily a troll feeder. I fed the trolls, but yeah, but anyway, somebody posted this weekend, they're like, "It is official that Brian Preston is an alien, an alien from the future," because and I cannot either confirm nor deny because, um, if you've seen me, probably, if you've been at Universal Studios on that Men In Black ride, if I was down there in the middle, you know, working all the controls, that's because they gave me a pass because, listen to this comment. 2017, I was saying, "Hey, if you guys are watching this because the whole version episode was about cash is no longer trash," I said, "Look, I know you guys who are watching this in 2023 when rates on cash are getting close to six percent are gonna laugh about us being excited about one and a quarter to one and a half percent," but that's just the world we're in. The person's like, "This guy's an oracle. He's an alien. He's an oracle. He knows something nobody else does." I don't know what else to say. I feel like it was, I just dropped the mic. I send it around to the team, and I was like, "Look, do I just have great field vision?" I love it. I love it. Whoever left that comment, thank you. Here's one other thing to think about as you're saving for a down payment. Don't just save enough for the down payment. Make sure that when you're saving for that first home, if you've never been a home buyer before, home ownership comes with a lot of other costs that you did not think of. Through that blinds window, Rebie, you know this. You win lawnmower. Lawnmower lender. Even like we had to buy one of those big trash bins. The end of the world. But it was just like way more expensive. Right? Just stupid stuff like that. Stuff adds up that you don't think about. So make sure you have, like, your down payment fund, but save a little bit more, so that you're not, you know, sleeping on the floor and have the eight-dollar paper blinds on your windows. For more information, check out our free resources.