Investing vs. a Savings Account for Your Down Payment
Your savings account earns 0.4% while home prices climb 3-5% per year. Here is how to close the gap and reach your down payment faster.
Side-by-Side Comparison
| Savings Account | Investing (REITs) | |
|---|---|---|
| Average return | 0.4-4.5% APY | ~8% historical avg |
| Growth type | Linear | Compound |
| Keeps up with home prices (3-5%/yr) | Barely / No | Yes |
| Tax advantages | None | Tax loss harvesting |
| FDIC / SIPC protection | FDIC up to $250k | SIPC up to $500k |
| Liquidity | Instant | 1-3 business days |
| Risk | None | Market fluctuation |
The Real Cost of a Savings Account
A savings account feels safe, but safety has a hidden cost. At 0.4% APY, your money barely grows while home prices rise 3-5% per year. Every year you save in a traditional account, your down payment target moves further away.
Example: $500/month for 5 years
Savings account (0.4% APY)
~$30,300
$30,000 contributed + ~$300 in interest
Investing in REITs (~8% avg return)
~$36,700
$30,000 contributed + ~$6,700 in growth
That is an extra $6,400 toward your down payment, just by choosing to invest instead of save. Over longer timelines, the gap widens even more thanks to compound growth.
Meanwhile, if home prices in your area grow 4% per year, a $400,000 home becomes a $487,000 home in five years. Your savings account balance of $30,300 covers less and less of that rising price. Investing helps your money grow alongside the market instead of falling behind.
When Investing Makes Sense
Investing is not always the right choice. Your timeline is the most important factor.
Invest if your timeline is 2+ years
Over any 2+ year period, diversified investments have historically outperformed savings accounts. The longer your timeline, the more compound growth works in your favor. If you are 2-7 years from buying, investing is likely the better strategy.
Save if you are buying within 12 months
If you plan to buy within the next year, a high-yield savings account is the safer bet. Short-term market fluctuations could reduce your balance right when you need it. Protect what you have earned when the finish line is close.
For timelines between 12 and 24 months, consider a blended approach. Keep a portion in savings for stability and invest the rest to capture some upside.
How Bricks Helps
Bricks is purpose-built for renters saving for a down payment. It is not a savings account pretending to help. It is an investing platform designed to get you into your first home faster.
Automated REIT investing
Set your monthly amount and Bricks automatically invests into a diversified portfolio of REITs. No stock picking. No guesswork.
Track progress as bricks
Every $100 invested is one brick. Watch your bricks stack up toward your down payment goal, making saving feel tangible and rewarding.
Tax loss harvesting
Bricks automatically harvests tax losses to reduce your tax bill, turning market dips into tax savings that keep more money working for you.
See your personalized timeline with our Down Payment Timeline Calculator.
Start investing toward your down payment
Bricks automatically invests for your future home. Join the waitlist for early access.