How Much You Should Save For Home Repairs

There are a lot of great things about owning a home, but having to finance expensive home repairs isn’t one of them. It’s pretty much a guarantee that you’ll face some sort of home maintenance and/or repair project while owning a home, and costs can vary widely, with some projects running up in the thousands of dollars. For that reason, it’s important to figure out how much you should save for home repairs ahead of time so that you don’t find yourself scrambling to come up with the money to pay for a leaking roof or busted furnace. The better you can budget, the less stress you’ll have when you do face those inevitable repair needs.

There are a few different schools of thought when it comes to how much you should save for home repairs. Which method works best for you depends on your current financial situation, your saving style, and certain factors regarding your home. If you own an older house (think 20 years or older), or if your house is located somewhere that’s prone to weather extremes like harsh winters or flooding, then you’re going to want to budget more for repairs.

It’s estimated that three in 10 home owners aren’t sufficiently prepared for repair costs. With all this in mind, let’s take a look at some of the most common approaches to how much you should save for home repairs so that you can reduce your chances of being one of them.

The Percent Rule

Depending on who you ask, you’ll see experts recommending that you save between 1% of 4% of your home’s purchase price annually for home repairs. As an example, if you bought your home for $250,000, that’s $2,500 to $10,000 a year that should be going into a dedicated savings account.

The logic behind this rule has less to do with the fact that home repairs tend to actually cost a set percent of your home’s value and more to do with just making repair savings a rote part of your financial planning. By designating how much you should save for home repairs as a set percentage, you should have an easier time visualizing what to set aside each year. And while you probably won’t come up against $2,500 or $10,000 in repair costs each year, you might find yourself facing a one-time $15,000 repair bill that you’ll be glad you saved in advance for.

So why might you want to save closer to 4% than 1%? It depends largely on the market conditions under which you purchased your home, as well as the home-specific factors we went over before. In terms of market conditions, if you purchased your home in a strong buyer’s market and know that you underpaid for it, you’re going to be better off putting aside an amount each year that’s closer to what the home’s actual value is, as opposed to what you paid for it.

The Square Footage Rule

Another way to tackle the issue of how much you should save for home repairs is to go by the square footage rule, which dictates that each year you set aside $1 per square foot of your home. If your home is 1,400 square feet then, that’s $1,400 a year into a home repair savings account.

Again, you’re going to need to consider the age and location of your home as well when determining your approach. While the square footage rule is definitely a good rule of thumb to follow (and maybe even a bit more so than the 1% to 4% rule, since your home’s square footage is most likely a greater indicator of its repair cost needs than its purchase price), it still fails to account for those specific factors that play a major role in repair expenses.

Additional Tips for Saving for Home Repairs

Whether you opt for the percentage rule, the square footage rule, or a combination of the two, follow the tips below to fine tune your saving efforts and maximize your contribution.

Don’t just consider other factors—save for them. It’s not enough to just know that you should be saving a bit more if certain factors apply to your home—you need to actively account for them. Add 5% to 10% on to your savings goal for each of the following factors that applies to your home:

    • 20 years or older
    • Poorly maintained by previous owner(s)
    • Located in area with weather extremes (think super cold winters, proneness to natural disaster, etc.)
    • Located in area with high average repair material and labor costs

    Each of these factors plays a big role in how high your repair costs can be, so it’s definitely smart to make them a savings priority.

    Keep the money in a cash-ready savings account. Saving anywhere is better than saving nowhere, but the best way to go is to keep your home repair savings in a separate, interest-bearing account that you can pull cash out of as needed and without penalty. If you’re organized, you can keep the money in your standard savings account, but if you want to keep a closer eye on your repair budgeting, then you may want to create a savings account just for these funds.

    Practice prevention. Taking good care of your home reduces your risk of facing lofty repair bills, so stay on top of regular home maintenance. This includes thing like cleaning and replacing your furnace and air conditioning filters on a regular schedule, winterizing your home before cold weather hits, and inspecting things like gutters, downspouts, and roof tiles right away after a storm. In addition to preventing repairs in the first place, this also helps ensure that if something does happen, you catch it in an early (and less expensive) stage.

    Save money in other ways. Help build up your home repair savings account by making a conscious effort to save money on other home ownership related expenses. Everything from optimizing your home’s energy usage to setting and sticking to a grocery budget means more money in your pocket—and thus more money you can set aside for the occasional big expense. .

    Get comfortable with a bit of DIY. A lot of the expense of home repairs is related to labor costs. Bringing a professional to your home can cost hundreds of dollars, even for a small job. If you can, try to take on some repair tasks yourself. With DIY blog posts, YouTube videos, and a bit of assistance at your local home improvement store (plus a little bit of time and patience) you can probably do more than you think.

    Figuring out how much you should save for home repairs is part and parcel of being a home owner. And while there’s unfortunately no standard way of doing so, you’re already a step ahead just by considering this effort as a necessity. In the past year, 88% of home owners had to finance a major home repair or improvement project, with an average spend of $4,958. And more than half of home owners had to manage multiple projects. Since there’s pretty much no escaping the fact that you’ll face a major home repair at some point, and probably at multiple points, the sooner you can make home repair savings a standard part of your annual budgeting the better.

    Keep in mind that there are ways to finance home repairs if you don’t have enough funds on hand when a big bill does roll around. Learn all about them here.