As soon as our third child was born, friends started asking when we were buying a minivan.
We could see their point. Fitting two car seats and a booster seat into the back of our hatchback was a challenge, especially on cold winter days when we had to freeze our fingers digging under the car seat for the booster seatbelt. Having a vehicle with a third row of seating really would make life easier.
So we started test-driving cars. But we soon realized that the car we wanted, a larger, late-model vehicle with all the latest safety features, would cost about $30,000—money we didn’t have. Instead of taking out a car loan, we kept doing the car seat squeeze and put some money aside every month to save for it.
Our baby was two and a half before we finally had the money saved. We started test-driving cars again, this time with an eye to buying. Then my husband lost his job. We felt grateful that we hadn’t taken on a car payment, which would have added to our financial strain while we stretched his severance and unemployment to pay the bills.
Within a few months, my husband got a great new job—but it required us to move across the country. The housing market in our Chicago suburb was still in a post-recession slump, and we knew we wouldn’t be able to get a good price for our home. We rented it out instead of selling.
Next, we had to figure out how to get housing in our new location, the San Francisco Bay Area. Real estate prices were down there, too, and it looked like a great time to buy. But without selling the house we still owned, would we be able to pull it off?
Thank goodness we had saved up for that car. We put the $30,000 in the car account toward a down payment. With that, some help from the new employer, and a small loan from family, we were able to purchase a house without selling our previous home.
In the year after we bought, home prices in the Bay Area jumped steeply. If we had waited, we probably never would have been able to buy a home here. We love our house, our neighborhood, and our kids’ school, and we know that the only reason we get to live here in our own home is because of that car savings fund that we were able to tap for a down payment.
Of course, we weren’t able to buy the car we’d wanted. In fact, our family doesn’t own a car at all now. We sold the old hatchback before we moved, planning to purchase a new car in California once we’d replenished our savings. But once we arrived, we found that our new community is so walkable that we don’t need to drive on a daily basis.
With this lesson in mind, here are my 5 tips for saving up for a big purchase:
1. Scope out your goal.
Before we started saving, we test-drove cars so we could picture—and even smell the leather interior of—the vehicle we were saving for. Knowing exactly what we wanted to buy helped us set the financial goal, and it helped us keep our eyes (and other senses) on the prize.
2. Tap every source of extra cash.
Every time I made a purchase online, I would click through a cash-back website, which gave me a small rebate on nearly everything I bought. Eventually, I would receive a check from the site, which went straight to the car savings account. When I saved money by using coupons at the grocery store, I deposited the money saved into the savings account, too. Another way to keep adding to savings is to use a credit card that rewards you with cash back—and even better, one that rewards you for being financially responsible. With the new Citi® Double Cash Card, for example, cardholders earn 1% cash back on purchases and 1% as they pay for purchases in full or over time.
3. Set up a new income stream.
A year after our third child was born, I was able to get a part-time job. I set up a new savings account and had my paychecks deposited there, so every penny—after babysitting costs—went into the car fund.
4. Cut back on recurring expenses.
Deciding not to buy something is hard. It’s easier to eliminate or reduce a bill that happens automatically every month, so you only have to decide once. Consider dropping cable TV or a gym membership for savings that will continue long after you make the call.
5. Make your savings pay.
Interest rates are low right now, but it still makes sense to shop around for a bank account that will pay you something while you accumulate. Look into CDs or money market accounts for the best rates.