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Americans were up in 2020 due to record-low interest rates and quarantine measures that kept people inside isolated bought most of the houses They have been since the 2006 real estate bubble.

Though the mortgage interest rates have recently increased since the beginning of 2021 they are still remain near historic lows. Those looking to take advantage of the low prices may want to buy now. Others who are waiting a little should take this time to find the right savings account to hold their down payment fund.

Money destined for a large investment like a home should be kept in a savings account where it can grow and be protected at the same time FDIC insurance. Prospective homeowners should avoid investing their down payment unless home ownership is a distant future goal.

Choose spoke to two certified financial planners about their advice.

The best place to save for a deposit

Lauryn Williams, a Texas-based CFP and founder of It’s worth winningsuggests putting your money in any savings account. Ideally, choose one with a higher interest rate than your conventional savings or checking account.

Examples are a High yield savings or Money market account. Although savings rates are consistently lower compared to stock market returns, you can still earn a lot more with these types of savings accounts than you can with the national ones 0.04% or 0.03% average APYs on savings or interest-bearing checking accounts.

With a money market account, users still get some checking account features, such as: B. Check-writing rights, debit cards and access to ATMs. Savings accounts, on the other hand, aren’t set up for very many withdrawals and transactions, but you can still access the cash should you ever need it.

Select analyzed and compared dozens of savings accounts offered by online and brick-and-mortar banks, including major credit unions. Below you will find our first-class high-yield savings accounts and money market accounts. They each offer interest rates that are above the national average, and they all are FDIC insured There are no monthly maintenance fees and no minimum deposit requirements to open an account.

What are you not doing with your deposit savings?

Because of the risk involved in getting your money into the market, you’re not investing the money you have in store to buy a home in four years or less, suggests Douglas Boneparth, a New York City-based CFP, president of Bones fide wealth and co-author of The Millennial Money Fix.

“If you have a little more time on your side or want to lose some money, you could consider a very low-risk investment portfolio, but there are no guarantees,” adds Boneparth.

The stock market offers the potential for much higher returns than the interest you would earn on a savings account. The average stock market return has moved historically 8% per yearWhereas in the recent past annual percentage returns have been achieved on high-yield savings accounts reach a little more than 2% at best.

However, Williams cites last year as an example of how volatile investing can be: the sharp fall in the S&P 500 (an index that mirrors the entire U.S. stock market) in February and March 2020 at the start of the pandemic was unprecedented – and a decline that we hadn’t seen since the stock market crash of 1929 during the Great Depression. Trading platform Robin Hood points out that it took only 22 trading days for the S&P 500 to fall 30% (from February 19 to March 20, 2020).

“Imagine you saved $ 100,000 in the past five years to prepare for a down payment,” says Williams. “You decided to do this in an investment account. You find the perfect home and then … Covid hits. Overnight your $ 100,000 turned into $ 60,000. Now you have to include losses to either Use the rest to buy your home, or wait for the market to recover. “

Bottom line

Knowing your schedule for buying a home can help determine where to put your money to save for a future down payment. If it’s short term (four years or less), keep that money in an FDIC-insured savings account that earns above average interest and gives you access should you need to.

For future homeowners planning further into the future, you can consider taking a slightly higher risk by investing that money in the market for a potentially higher return. If you know home ownership is one of your goals, speak to a trusted financial planner well in advance or just stick to a savings account to keep things simple.

Editor’s note: The opinions, analyzes, ratings or recommendations expressed in this article come exclusively from the Select editorial team and have not been reviewed, approved or otherwise endorsed by third parties.