Saving Up for Your First Home

Book a free session with one of our Wealth Coaches to learn more about saving for your first home.

Many young Australians find the prospect of buying their own home a challenge. Without financial assistance from family – it can be extremely difficult to enter the property market.

This is especially the case for city dwellers, with many people giving up hope of home ownership completely due to the prohibitive nature, and instead are focusing on lifestyle goals like travel.

However, all hope is not lost. Starting early and beginning to save as soon as possible will help your odds.

For a single person between the age of 25-34 earning an ‘Average’ Salary ($80,600 gross, $64,020 after tax)1 trying to purchase an ‘Average’ unit ($637,578)2, we estimate it would take approximately 10 years for you to save for a 20% deposit. 10 years might sound like a long time, but it shows if you start early and be dedicated with your savings – you could potentially enter the property market in your 30’s, even in a capital city. And it’s important to note that this is the average price – you could snag a much cheaper property, much earlier – but this might not be your dream home.

Besides obvious helping factors like The Bank of Mum and Dad, or having a partner to invest with, there are some other useful strategies to help you on your journey. The foundations of buying your first home should be the same regardless of your income, age, or investment experience.

 

Here are 6 steps you could consider helping save for your first home:

  1. Better savings (better budgeting): Many financial advisers agree that you need to be saving at least 20% of your income for long term wealth accumulation. However, you can drastically increase this through a dedicated savings plan. You don’t want to sacrifice your lifestyle, but you can probably identify some areas you can cut back on to save an extra 5% or more. A Wealth Coach can help identify areas of spending that could be reduced and help with some of the psychological biases that make sticking to a savings plan difficult.
  2. Additional income sources: This is where you can consider trying to increase income sources with side hustles or picking up extra hours at work. At Wealth Maximiser our Wealth Coaches can provide valuable, practical guidance on how to increase your total income, for example how to negotiate a pay rise. Think about other things like renting your car out, moving home, if possible, or work remotely to save on transport costs.
  3. First Home Super Saver Scheme (FHSSS)3: The FHSSS is a great but underutilised scheme that allows you to save for a first home deposit through Superannuation. The main benefit of this is that you can benefit from significant tax savings if utilised over several years. Based on the average salary stated above, it is estimated that you could save an additional $12,7344 if the scheme maxed out through salary sacrifice or personal deductible contributions. The other great thing about the FHSSS is that the once contributed, the funds are essentially locked away and can’t be used for anything but a home purchase – which can help reduce temptation to spend savings.
  4. Investing Savings: Because most younger people’s home purchase journey will be over several years, you can examine investments that generate greater returns than a simple bank account. This will come with an increased level of risk – so it’s important to make sure it’s within your risk tolerance and suited to your investment timeframe.
  5. First Home Guarantee (FHG) Scheme5: This scheme was introduced to help first time buyers get their foot in the door earlier. Subject to criteria, you can in some cases purchase your first home with a deposit as little as 5%, with the government essentially acting as a Guarantor on the loan which waives the Lenders Mortgage Insurance (LMI). This can be great in some cases, however it may be harder for loan approval, and will mean you have a higher starting loan balance and higher mortgage repayments, which might not be feasible.
  6. First Home Buyers Assistance Scheme (NSW only): If you’re buying a first home under the value of $800K, you can get an exemption for stamp duty. For the ‘average’ unit discussed previously – the total saving would be around $23,221.6

 

Let’s think about the average figures discussed, and examine a scenario where you managed to implement some of the six strategies listed above:

  1. Budget better: if you saved an additional 5% of an average salary, you’d save roughly an extra $3,201 per year.
  2. Side Hustle / Extra hours: if you managed to earn roughly an extra $1,000 per year (net).
  3. Maxed out the FHSSS over 3-4 years through Salary Sacrifice: Saving an additional $12,734.
  4. Utilise the FHG Scheme: Save for a deposit of at least $32,000
  5. Exempt stamp duty of $23,221 (in NSW)

 

As shown, with some small steps, you could save up additional $52,759 over 4 years – with more than sufficient funds for a deposit using the First Home Guarantee Scheme.

This could cut down your timeframe for ownership in half, getting your first foot onto the property ladder much earlier.

To learn more about these strategies, feel free to book a complimentary introduction call with a Wealth Coach at Wealth Maximiser.

Disclaimer
This information is of a general nature only and does not take into consideration your objectives, financial situation, or needs. Before acting on this information, you should review the Wealth Maximiser Financial Services Guide and Wealth Maximiser Terms & Conditions and consider this information in light of your own objectives, financial situation, and needs. Wealth Maximiser is operated by NobleOak Services Limited ACN 112 981 718 AFSL 286798.

  1. https://www.canstar.com.au/savings-accounts/average-aussie-earn-save-owe/ (The average salary has been calculated as the gross median salary between men and women working full time.)
  2. https://www.smh.com.au/property/news/sydney-s-median-house-price-reaches-a-new-peak-of-almost-1-6-million-20240123-p5ezcm.html
  3. https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme
  4. https://www.csc.gov.au/calculators/fhsss-calculator/index.html#/calculator/
  5. https://www.housingaustralia.gov.au/support-buy-home/first-home-guarantee
  6. https://www.nsw.gov.au/housing-and-construction/home-buying-assistance/eligibility-assessment