A Guide to Saving Money to Move Out

If you’ve finished high school or college and are still living at home, you’re not alone. Over 40% of millennials (42%) are currently receiving or have received ongoing financial support from their parents or guardians after the age of 23.

Additionally, nearly two-thirds of millennials (64%) and 55% of Gen Zers have postponed achieving financial milestones due to economic conditions, and many are grappling with student debt.

However, this doesn’t mean the situation is hopeless. To navigate these challenges and eventually move out on your own—whether by renting independently or purchasing a home—effective saving, investing, and budgeting will be crucial. If you’re determined to make the transition from living with your parents to living on your own, this guide will help you get there.

How to save up to move out

Whether you’re aiming to rent an apartment or purchase a home, having a solid savings foundation is crucial. Renting requires covering deposits, fees, and other costs, while buying a home involves a significant down payment and closing costs. On average, a monthly mortgage payment nationwide is around $2,200.

To build your savings, start by addressing any existing debts. Since you’re living at home, you likely have fewer expenses, which gives you a great opportunity to direct a substantial portion of your income toward paying off student loans and other high-interest debts. Reducing these balances quickly will make it easier to save for your own place and may even improve your credit score, benefiting both rental applications and mortgage approvals.

1. Open a savings account

Start with a high-yield savings account to maximize your earnings. With current rates reaching around 5%, this is a great time to earn more from your savings. Compare options from banks and credit unions, noting that online institutions often offer more competitive rates than traditional banks.

2. Increase your income

To build up your savings, consider boosting your income. This could involve working additional hours at your main job, taking on a side gig, or freelancing. Higher earnings will help cover both essential expenses and contribute to your savings.

3. Create a personal budget

To free up more money for savings, create a budget that tracks and limits your spending. Ensure you never spend more than you earn to avoid accumulating more debt. Establish budgets for individual expenses and use a savings calculator to determine how much you need to save daily and monthly to reach your goals.

4. Build up your credit

1. Your credit score impacts both renting and buying a home, affecting your options and costs. A strong credit score will help you secure better terms and potentially lower costs. To improve your credit:
   • Get a credit card (if you don’t have one) and maintain a low credit utilization ratio. Pay off your balance in full and on time each month. Use it for routine purchases like groceries and bills, rather than unnecessary expenses.
   • Consider becoming an authorized user on a credit account with a strong credit history.
   • Check your credit reports from Experian, TransUnion, or Equifax for any errors or inaccuracies and resolve them promptly to boost your score.
   • Keep old accounts open to maintain a long credit history, which positively influences your score.

By following these steps, you’ll be well on your way to achieving your goal of moving out and establishing your own independent living situation.

Costs of moving out

When planning to move out, it’s easy to focus on major expenses like monthly rent or mortgage payments, but there are additional costs you might not have considered.

For renters, you’ll typically need to pay the first and last month’s rent along with a security deposit when signing a lease. Some landlords also charge an application fee to cover the cost of credit checks, background checks, or other administrative tasks. These fees can vary by location and may not always be included in the initial lease agreement.

Other move-in costs to consider include:

• Moving Expenses: Costs for hiring movers, renting a moving truck, and purchasing moving supplies.
• Utilities: Fees for setting up water, electricity, and gas services.
• Phone and Internet: Costs for setting up or transferring your phone and internet services.
• Registration: Updating your address with your driver’s license, bank, car registration, and other official records.
• Furniture: Purchasing necessary furniture for your new place.
• Supplies: Stocking up on household essentials like cleaning supplies and kitchenware.
• Decor: Costs for items to personalize and decorate your new space.
• Bedding: Buying new bedding, pillows, and other essentials for your bedroom.
• Technology: Acquiring any necessary electronics like a computer or TV if you don’t already own them.
• Food: Initial grocery shopping to stock your kitchen.
• Pet Fees: Any additional charges for bringing a pet into your new home, if applicable.

Additionally, you may encounter activation fees for utilities, which can add to your upfront costs. Planning for these expenses will help ensure a smoother transition to your new home.

Saving up to rent

To begin saving for your future rental, start by researching rental prices in your area. A common guideline is to keep your rent expenses at no more than 30 percent of your monthly take-home pay. Spending less on rent allows more funds to be allocated toward both short-term and long-term savings goals. Once you’ve determined your potential rent, budget an additional 30 percent of that amount for living expenses, which typically include:

• Water
• Electricity
• Gas
• Renter’s insurance
• Internet service

Also, check if the rental units you’re interested in require any deposits. Many landlords ask for a security deposit, as well as the first and last months’ rent. If you have a pet, there might be an additional pet deposit. Don’t forget to factor in moving costs, such as packing materials, moving truck rentals, or fees for a moving company.

Saving up to buy

With 78 percent of U.S. adults considering homeownership a key part of the American dream, buying a home might be an essential goal for you. However, owning a home comes with additional costs beyond the purchase price that you’ll need to plan for.

When buying a house, one of the primary costs is the down payment—a percentage of the home’s purchase price that acts as a deposit. The amount required for a down payment varies based on your mortgage type, the home’s price, and your credit profile. Generally, down payments range from 3 percent to 20 percent of the purchase price. For instance, on a $200,000 home, you could expect a down payment between $6,000 and $40,000.

Though these figures might seem daunting, they are manageable with careful planning. Here’s how to prepare:

• Estimate Your Down Payment: Consult with a loan officer or mortgage lender to get a clear idea of your required down payment based on your specific situation.
• Set a Timeline: Determine when you aim to purchase your home. This will help you calculate how much you need to save each month to reach your goal.
• Create a Savings Budget: Once you know your monthly savings target, adjust your budget to allocate funds towards this goal.
• Automate Savings: Set up automatic transfers from your paycheck or checking account to a dedicated savings account or use a savings app to ensure you stay on track.
• Utilize Windfalls: Apply any extra cash you receive—such as bonuses, tax refunds, or gifts—directly to your home savings fund.
• Allow for Flexibility: Be prepared for unexpected expenses or changes in income by including a financial cushion in your plan. This will help you stay on course even if things don’t go as planned.

Other options to save on costs

If buying a home feels overwhelming due to the costs, consider these alternative strategies:

• Get a Roommate: Sharing your home with a roommate can help reduce both upfront expenses and monthly costs.
• Opt for a Smaller Home: Look into smaller properties like townhomes or condos. These typically require lower down payments and often come with reduced mortgage and utility costs.
• Explore Low-Down Payment Loans: Check out loans with minimal down payment requirements. VA and USDA loans offer zero down payment for eligible buyers, while FHA and conventional loans often require just 3 to 3.5 percent down. Additionally, you might find assistance programs for down payments and closing costs that can help reduce your initial financial burden.