Saving for your first home is more difficult now than it’s ever been before. Recent property tax changes unveiled in the 2026 Federal Budget are aimed at making home ownership more achievable for a greater number of young Australians, but to say that the myriad problems are magically solved is as far from the truth as you can get.
Still, that doesn’t mean it’s impossible. There are several strategies that are worth considering when it comes to saving up for your first home, but which one suits your needs the most and which is the most effective?
First home deposit strategies
Of course, the ways that you can stockpile cash and generate more money on top of your income are almost countless. However, when it comes to saving up for a home loan, here are a few common ways that Aussie singles and couples like to go about it:
Stashing money in a high interest savings account
The simplest and most obvious is to put as much money as possible in a high interest savings account. This can be useful if you’re going to be constantly adding to your balance and need to dip into it to manage your living expenses, as you can maximise the amount of interest you can net yourself each month.
The main problem with a savings account is that, under current economic conditions, either the interest rate you receive could be getting outpaced by inflation or house prices are growing faster than your potential return. Many high interest accounts will also cap the balance on which you can earn the maximum rate at $50,000 to $100,000.
- Low risk, with predictable return
- Low effort
- Lower return on investment
- May take longer to reach goal
A term deposit is another savings option, but this may not be flexible enough for a first home buyer. While you could put your initial savings in one for a few years, the inability to continue to deposit more money without taking out a new term deposit means you likely aren’t maximising your interest return.
First home super saver (FHSS) scheme
An avenue only available to first-time buyers is the FHSS scheme, which allows you to deposit money into your superannuation account and withdraw it when you buy your home. The main incentive for doing so is that the funds you withdraw from your super are taxed at a reduced 15% rate, compared to the 30% or 37% you’re likely paying now.
The scheme allows users to make contributions of up to $15,000 per financial year, capped at $50,000. When used in conjunction with a high-interest savings account, you could not only generate useful interest on your funds, but also slash the amount of tax that’s payable. You’ll probably need to speak to an accountant before diving into the FHSS scheme, though.
- Significant tax savings
- Removes temptation to withdraw
- Annual and overall caps
- More complex in nature
Investing money in ETFs
Exchange traded funds, or ETFs, are investment funds that hold a range of assets such as shares and bonds. They allow you to buy into a ready-made basket of investments that can be traded on an exchange like a single share.
ETFs may offer greater long-term growth potential than a savings account, but returns aren’t guaranteed and values can rise or fall with market conditions. Finding the right balance between investing and savings will depend on your goals and risk appetite.
- Potential for greater return
- Instant diversification of investment
- Greater volatility
- Active management may be required
How much can I save for my home with each savings strategy?
There are too many variables to count to give a definitive answer on how much you’d save through each method. However, we can analyse an example of what these strategies could look like over a five-year period based on some simple assumptions.
If we were to stake a standard Aussie couple who are earning $90,000 per year each, both have $10,000 in the bank and are able to save $12,000 per year each, the available strategies might look like this:
- Savings only: pour all money into a joint savings account.
- Aggressive ETF strategy: leave $10,000 in a joint savings account and invest $5,000 each in ETFs upfront. In the first four years, invest 100% of available savings into ETFs. In the fifth year, focus on topping up the savings account to maximise usable deposit without attracting maximum CGT.
- Balanced ETF and savings: leave $10,000 in a joint savings account and invest $5,000 each in ETFs upfront. In the first four years, split monthly savings equally between investing in ETFs and a joint savings account. In the fifth year, focus on topping up the savings account to maximise usable deposit without attracting maximum CGT.
- FHSS and savings: salary sacrifice into super to maximise tax savings and reach maximum contributions. Invest $5,000 each upfront, then $10,000 in the first year, $12,000 in the second and third years and $11,000 in the fourth year. Once their contribution limit is met, all funds will be deposited into savings from the final month of the fourth year until the end of the fifth year.
Assumptions
- Their joint savings account comes with a 5.00% p.a. interest rate
- Their ETF return is at 9.30% p.a., which is based on an approximation provided by Vanguard
- Their super return is at 7.94% p.a., which is based on the best-performing balanced super funds
| Year | Savings only | ETF aggressive: invest until end of Year 4, then savings | ETF balanced: invest until end of Year 4, then savings | FHSS max + savings surplus |
|---|---|---|---|---|
| 1 | $45,581 | $46,532 | $46,286 | $46,228 |
| 2 | $72,471 | $75,616 | $74,537 | $74,600 |
| 3 | $100,736 | $107,499 | $104,912 | $105,292 |
| 4 | $130,448 | $142,450 | $137,587 | $138,479 |
| 5 | $161,679 | $180,275 | $172,506 | $173,873 |
| All figures are estimates and calculations are for illustrative purposes only. $12,000 per year investment calculated based on $1,000 deposited per month. ETF aggressive reflects $1,000 per month paid into ETFs, while ETF balance reflects $500 paid into ETFs and $500 put into a savings account. Interest rates, fees and other market factors can vary greatly. Speak to your accountant or a financial professional to find out whether any of the above strategies are suitable for your specific situation. | ||||
As you can see, the aggressive ETF strategy would yield the best results over five years, assuming returns are consistent at 9.30% p.a. (though this is highly unlikely to be the case in reality). However, these figures don’t account for tax paid across the savings period.
What strategy is best after tax?
| Strategy | Gross deposit saved | Estimated tax impact | Estimated tax saving | Estimated usable deposit |
|---|---|---|---|---|
| Savings only | $161,679 | $6,504 | $0 | ~$155,175 |
| ETF aggressive | $180,275 | $8,600 | $0 | ~$171,700 |
| ETF balanced | $172,506 | $7,800 | $0 | ~$164,700 |
| FHSS max + savings surplus | $173,873 | $18,500 | $17,000 | ~$172,400 |
| All figures are estimates and calculations are for illustrative purposes only. Interest rates, fees and other market factors can vary greatly. Speak to your accountant or a financial professional to find out whether any of the above strategies are suitable for your specific situation. | ||||
When tax is factored in, the FHSS and savings strategy reaps the greatest return. This is for two main reasons:
- The money withdrawn from super through this method is taxed at the discounted 15% rate
- Tax savings are increased by salary sacrificing the $1,000 per month, as taxable income is lowered
Although the aggressive ETF strategy result is almost the same after five years, there’s a great deal more uncertainty that goes into the calculation. A lot has to go right to deliver that return. If it doesn’t, though, you could potentially lose a significant amount of money and have your savings goal set back by a factor of years.
On top of that, the recent announcement by the Australian Government that changes would be coming in relation to capital gains tax (CGT) could also mean that the tax you end up paying on the sale of your ETFs is higher.
Which savings strategy is best for me?
By combining the FHSS scheme with a high-interest savings account, the couple would stand to receive the largest usable deposit with a relatively low-risk strategy over five years. If you’re looking to buy a home in the next five years, utilising the FHSS scheme will leave you better off to the tune of $17,000 compared to dumping everything in your savings account (based on the above example).
However, each person is different and their circumstances unique, while market conditions can change significantly in a matter of years or months. It’s worth consulting an accountant or tax professional if you’re unsure which strategy is best for you.
It’s never too early to think about savings strategies
“Whether you’re ready to buy a house or have only just started thinking about it, having an idea of what your savings goals are and how to get there will help you focus your efforts and maximise your results,” Savvy Home Loans Expert Daniel Carter said.
“Speaking to your parents or friends can be helpful, but it’s worthwhile sitting down for a chat with a professional, such as a broker who offers free consultations.
“That way, they can share their industry knowledge with you and guide you towards a suitable option for your profile.”
