Episode Details

We all know that property prices in Australia have gone stupid in recent years. One significant consequence of that has been that first home buyers have found it increasingly difficult to enter the property market. Banks like to see at least a 10% deposit, and in the ideal world you'd have a 20% deposit to avoid mortgage insurance costs. But when a first home can often cost north of half a million dollars, saving a deposit of that size can be really challenging, especially if you have rent to pay, and perhaps a HECS-HELP debt that sucks away a portion of your income.

Fortunately there has been recognition of this problem by both sides of politics, and the solution that has been legislated in recent months is the First Home Super Saver Scheme.

So what is it, and should the First Home Super Saver Scheme be on your radar as a strategy to enter the housing market? In short, should you care about this new initiative?

Click here to get the toolkit

It's always good to start at the beginning, so before we dive in, let's just consider the objective of the First Home Super Saver Scheme. Home ownership is considered a good thing for the nation. Now as regular listeners and readers will recall, in episode 19 I looked at whether people who simply can't enter the property market are financially doomed, and the conclusion that we found is certainly not.

However for those that do wish to own their own home, and that is most of us, the rationale is sound. Owning the roof over your head gives you long term financial security. Sure, you'll have a mortgage to repay for many years, but one day this will be paid off, and so in your later years, you'll have your housing needs covered for relatively little ongoing expense. This makes retirement that much more affordable, and also provides you with the security of knowing you can remain in your community without disruption.

Building equity in your home may also enable you to finance things like starting a business, and provide funds for Aged Care needs towards the end of your life if needed.

Home ownership also tends to align with a sense of equality. I enjoy reading about the period around the French Revolution, in the late 1700's. In that era (and it was much the same throughout Europe and England), the wealthy few owned everything, and the vast majority eked out a living as best they could. In that type of society, the average person had little control over their life, and got blown about by the whims of the wealthy elite, with their wars and ridiculous extravagances.

Australians have always resisted a society like this. The concept of a fair go is ingrained in us. And whilst in recent years it feels like perhaps we've headed a bit more towards the wealth of the nation become concentrated in fewer hands, the ability to access home ownership for all Australians is a really important foundation stone of our society.

So the First Home Super Saver Scheme exists to help ensure that entry into the housing market remains possible.

So how does it work? Now I need to give a jargon alert here. I always try very hard to not use financial jargon when I write pieces for Financial Autonomy. But because the First Home Super Saver Scheme feeds into the superannuation system, and because Australia's superannuation system is almost a language all of its own, I won't be able to avoid having some jargon in this post. I'll do my best to explain things in what I hope are easily understood terms, but if anything is unclear, don't hesitate to drop me an email to clarify.

Click here to get the toolkit

The First Home Super Saver Scheme enables you to make extra contributions