How To Save for a Down Payment While Fighting Inflation

Shot of a young woman using a laptop and going through documents while working from home.
mapodile / Getty Images

With interest rates on the rise, requests for mortgage loans are falling, and it appears that the superheated housing market might finally be starting to cool. If you’ve been putting off buying a home, but you’re saving for a down payment so you’ll be ready when the moment is right, your enemy is no longer too few houses and too many buyers — it’s inflation, which nibbles away at your savings with the release of every new CPI report.

More: 7 Financial Habits That Improve Your Daily Life
Look: In Less Than a Decade, You Won’t Be Able To Afford a Home in These Cities

The good news is that there are strategies to help you save money for a house or any other big purchase even as bruising inflation continues to put your dollars on a diet.

Invest In Real Estate While You’re Saving for Real Estate of Your Own

Brian Davis, a real estate investor and founder of SparkRental, is always on the lookout for passive income that doesn’t tie up his money in long-term investments — just as someone saving for a down payment in times of high inflation should be doing.

Building Wealth

He recently discovered Concreit, which stands out from the already crowded and ever-growing pool of real estate crowdfunding sites. First of all, there’s no minimum investment requirement and every single dollar you put in is backed with real estate — but if you’ll need your cash in the near term, Concreit’s biggest selling point is the relative liquidity that the platform offers.

“There’s no penalty against your investment principal for early withdrawal,” said Davis. “Although if you withdraw funds within the first year, they do ding your dividend payment by 20%.”

He’s referring to the impressive 5.5% dividend that Concreit pays, which beats all but a handful of stocks on the S&P 500, and is many, many times higher than what you’d get from a “high-yield” savings account.

“Even if you withdraw money in the first year, you’re looking at a 4.4% dividend yield, which still isn’t bad.”

Invest In Securities Designed With Inflation in Mind

Another tool for saving money for a big purchase while hedging against rising prices has “inflation” right there in the title.

Building Wealth

“As a more mainstream example, you can buy TIPS: Treasury inflation-protected securities,” said Davis. “They’re tied to the inflation rate and adjust their returns to match it.”

TIPS protect investors from the decline in their money’s purchasing power by adjusting the real value of the investment to make sure the buyer never loses principal — as inflation rises, so does the principal amount.

Since they’re backed by the government, TIPS are low-risk investments, but unlike Concreit, they’re not designed for investors who need quick access to their cash, the way a potential homebuyer might. According to TreasuryDirect, TIPS are issued in terms of five, 10 and 30 years — not exactly a workable timeline for someone considering a mortgage with roughly the same end date. The good news is, you can have the best of both worlds.

“For easy investing and liquidity, you can also buy shares in an ETF that owns TIPS,” Davis said.

STIP, VTIP and PBTP are among the most popular.

Shelter Your Savings in a Roth IRA

Individual retirement accounts (IRAs) are a lot like 401(k)s. You pay into them on a before-tax basis and pay taxes on your contributions when you start pulling from them in retirement — but crushing penalties await anyone who makes an early withdrawal.

Roth IRAs, on the other hand, are funded with after-tax money. That means that — although they’re still retirement accounts — you can grow your money in Roth accounts with stocks, bonds, ETFs and all the usual investments, but you can access your cash when you need it for a down payment or anything else long before you retire.

Building Wealth

Crystal Agbalog, founder of the personal finance blog Intentional FI, is saving for a down payment herself — and she’s using exactly that strategy to wait out the current seller’s market.

“My husband and I are each maxing out our Roth IRA,” said Agbalog. “Since we have no intentions of buying a house in this crazy market, we are saving $12,000 this year in a Roth to be used as a house down payment.”

Remember the Fundamentals

Roth IRAs, real estate crowdfunding and TIPS are undeniably strong strategies for growing money while inflation gnaws away at its value, but for Julie Ramhold, consumer analyst with, saving is still all about the basics.

Ramhold offers the following timeless tips:

  • Set up automatic savings: “The easiest way to save any amount of money is by setting up automatic savings,” Ramhold said. “If you receive your pay via direct deposit, take a minute to change those settings so that most of your paycheck goes into your preferred account but then a set amount goes into a separate savings account each time. You won’t miss the funds, and you’ll be quietly building your savings for whatever big-ticket purchase you’re planning to make.”
  • Audit your expenses: “Take a hard look at your expenses and be brutally honest with yourself about anything that isn’t necessary,” Ramhold said. “Are you subscribed to multiple streaming services, for instance? Do you actually use all of them on a regular basis? If not, consider cutting out the ones you rarely touch and then take that one step further and put the cost of those services straight into savings every month.”
  • Adjust your services: “Take a look at your bills like internet and phone plans and see if you can opt for cheaper alternatives,” Ramhold said. “This doesn’t mean giving up your internet. See if your provider is offering an introductory rate and call up their customer service and ask politely if you can have the same rate. When it comes to your phone plan, if you’re paying for unlimited data, you likely don’t need that if you’re around WiFi on a consistent basis.”
  • Cut back on spending: “The important distinction here is to not cut out unnecessary spending entirely,” said Ramhold. “Especially if it’s something that legitimately brings you joy. Saving for big purchases can involve sacrifices, sure, but depriving yourself entirely just makes the whole thing harder and can even make it easier to overspend if the temptation arises. Instead, cut back. If you’re buying coffee at your favorite shop five days a week, cut back to two or three, but on the days you don’t pick up a latte, move the cost of it from your main account to your savings.”

More From GOBankingRates

Share this article:

Building Wealth

About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for, a financial publication in the heart of Wall Street's investment community in New York City.
Learn More