Q. I am in my final year of university and am planning to buy a house within the next few years. I have been considering using the First Home Saver Account to save up for a deposit, but have heard it is not worth having if you only use it for a few years, is that true?
A. Saving for a deposit is extremely important and the more money you can save the better. There are several benefits that come with taking out a first home saver account; however, you will benefit the most from this account if it is a part of a medium to long term strategy. The First Home Saver Account has a similar rate to other high interest savings account, so the real difference between the two is the government contributions. The government will pay 17% of your personal contributions into the account each year until the maximum is reached. If you only keep the account for the four tax years that are required, the contributions you will receive from the government are minimal. However, if you plan to have this account for 10 years plus, you will have the chance to make bigger personal contributions and therefore receive higher contributions from the government.
Another point to consider is that if you decide you do not want to use this money for a house deposit anymore, you are not able to withdraw it. The money can only be deposited into your superannuation fund. Whereas with a normal bank account, you are able to use the money for whatever you want. Before you make a decision, you need to look at your situation and work out a plan for the next few years. You need to consider your career, your personal situation and other financial commitments. Please email email@example.com if you would like to discuss your options further for saving for your first home.
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