Buying a home is likely going to be the most expensive purchase you ever make in your lifetime. Even cheap homes are no longer cheap. In just the last four years, U.S. home prices have soared nearly 30% and the median price of a house is $412,300, according to the Federal Reserve.

That means you need to save up a good chunk of change as a down payment. While the average amount needed varies by state, nationally it is 15%. That translates into $61,815 for the average house. Oof!

That’s why I found this Redditor’s question on the r/MoneyDiariesACTIVE subreddit pretty interesting. breadchecklist said he got a nice pay increase after recently switching jobs and wanted to slowly put aside money for a down payment on a house.

While he doesn’t foresee himself buying one for at least a decade, he does live in an area that has a very high cost of living so he wanted to know where he should park his cash while saving up. Should it go into a high-yield savings account or the stock market?

24/7 Wall St. Insights:

• Buying a home is one of the biggest, most important purchases a person will make in their lifetime. The median price of a house in the U.S. is over $412,000.
• Saving up for a down payment is crucial and will amount to around $61,000 at the national average down payment rate of 15%.
• It is important you don’t put your down payment money at risk because you may find yourself caught short just when you need it most.

Squirreling away your acorns for a down payment

Investing in the stock market has proved to be the single best way to generate wealth over time. But you need a long-term investing horizon because the last four years are proof there are no guarantees. The stock market soared, then crashed, then soared once again.

It’s why you don’t invest any money you’re going to need in the next three to five years. Only money that you can commit for 10 years or more should be put into the market. But that means  breadchecklist should be good investing his down payment money, right? He doesn’t plan to need the money for at least 10 years.

While the Redditor could buy an S&P 500 index fund in hopes of earning the 10.5% historical average returns, I wouldn’t recommend it. Those returns have been realized over many decades, more than 70 years, in fact.  Expecting the benchmark index to produce  similar results (or even a little less) in a shorter period of time is not reasonable.

Now this isn’t tax or investment advice, of course, and everyone faced with a similar decision ought to consult with a tax pro or a financial planner, but for something as important as a down payment, you can’t afford to lose any capital.

Stocks vs. savings accounts

Although we’re in a bull market now, stocks can crash at any time. And they can stay low for longer than you can expect.

The 2000’s are known as “the lost decade” because the tech stock bubble burst, we had 9/11, and the housing and financial markets collapsed. That caused the S&P 500 to generate negative 0.44% returns over that decade. So if you had invested $10,000 at the end of 1999, you would have emerged in the new decade with just $9,569 in your account, over 4% less than what you started with. That’s an outcome breadchecklist can’t afford.

Instead, a high-yield savings account just may be his best bet. Most HYSA accounts offer rates between 4% and 4.5% these days, but you might be able to find 5% rates by shopping around, especially with online banks.

All top HYSAs are FDIC insured up to $250,000 per depositor per bank. And if you open an HYSA through a credit union, you have similar protections through the National Credit Union Association, which offers similar insurance as the FDIC.

Other benefits of HYSAs is that there are typically minimal monthly fees, you have access to your money when you need it, and it’s a safer option than the stock market or bonds.

Although rates could drop as the Fed enters a new rate-easing cycle, high-yield savings accounts remain a smart way to grow money you will definitely need with minimal risk.

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