Home, where the savings are.
Saving for a house is adulting — big time. But small, simple steps in your late teens and early 20s will help you achieve those long-term goals.
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Buying a house isn’t typically top-of-mind for someone in their early 20s. Between studying, embarking on the first “real job”, and moving out of home, there’s a litany of other “grown-up things” to worry about before even contemplating the Herculean task of saving for a house deposit. But Alice Kim is far from your run-of-the-mill 22-year-old.
Alice has already ticked off two major items on her bucket list, namely living for a year overseas (in Japan) and becoming trilingual (English, Korean, and Japanese). In less than six months, Alice has also managed to work her way up from an entry-level administrative assistant role to the plum position of Operations Manager at a thriving fin-tech startup. Home ownership is next on her radar, with a goal of saving more than $100K for a house deposit by late 2022.
According to the latest research from Deloitte, Alice’s home ownership aspirations aren’t so unusual. Deloitte’s “Global Millennial Survey” on the ambitions of Generation Z (those currently aged 17 to 24), revealed that one of the top goals for this cohort was buying a home. This is in stark contrast to Millennials, who were found to put a higher priority on travel.
While relatively early in her savings journey, Alice credits the First Home Super Saver (FHSS) scheme as helping her get a head start. “I had no idea about the FHSS until I read about it online. I feel like this feature has been designed specifically for people like me. I can save money for my house deposit to my super fund, and I can’t use it for anything other than buying a house. Basically, it’s saving me from myself and my shopaholic tendencies!” says Alice.
What is the FHSS?
The First Home Super Saver scheme is a federal government initiative that’s designed to make it easier for Australians to buy a house. First home buyers can withdraw up to $30,000 from their super fund to put towards a house deposit. It is important to note that this money cannot come from the mandatory 9.5% super contributions from employers. Rather, the funds available for FHSS come from any additional super contributions that are made as a salary-sacrifice or as an after-tax contribution. These additional super contributions will also get you extra money in your tax refund.
The FHSS is one of several government initiatives that help first home buyers get into the property market. The federal government will also be launching the “First Home Loan Deposit Scheme” from 1 January 2020 for up to 10,000 borrowers, which is where the government “guarantees” loans for first home buyers who have only saved a 5% deposit. This scheme means borrowers won’t have to pay Lenders Mortgage Insurance, which will save buyers tens of thousands of dollars off their home loan.
Additionally, there are several state-based initiatives. The First Home Owner Grant in NSW, for instance, gives borrowers a $10,000 grant for new homes that meet a particular criteria, and there are similar provisions in other states.
Alice is currently contributing $200 a month to her super fund, but she’s aiming to increase that to a thousand dollars per pay by the end of the year.
“I’m currently paying my parents a thousand bucks a month to live at home, which makes it difficult to set aside money for super, but I’m always looking for ways that I can save more and increase my super balance. This is actually what made me switch to FairVine Super, which has unique perks for growing your super fund. The RoundUps feature automatically rounds up any purchases I make to the nearest dollar, with the loose change deposited directly into my super fund. “My favourite feature is FairRewards, which gives me a cash rebate of up to 15% whenever I shop certain brands – and this money also goes to my super. I love that my monthly super contribution has increased without me having to consciously put money aside,” Alice says.
What motivates Alice?
As a second-generation Aussie, Alice witnessed firsthand how her parents struggled with money when they first migrated to Australia, with not much more than a single suitcase to show for their worldly possessions.
“It took my parents ten years to save up enough money to buy a house, and this was back when property was far more affordable than it is today. Being classic Asian parents, they have flat-out refused to let me move out until I can afford my own house, and this has certainly given me a bit of extra motivation to save up enough money.”
Alice has her eyes set on a one- or two-bedroom apartment in Sydney’s North-West. It’s still close enough to her parents’ house that she can pop around for some delicious Korean home-cooking, but a separate space that’s entirely her own where her parents won’t shame her whenever she goes on shopping sprees.
“I’m definitely not one of those people who’ll give up on soy lattes and my entire social life so I can save every cent. But I’m being smart about how I save my money. My super fund is really good about keeping me motivated, and the bigger my balance gets, the more I want to save!”
Retirement might seem like a world away to Alice, but owning a home is closer on the horizon. “It’s funny, superannuation isn’t something I’d normally be interested in, as my retirement is more than 40 years away. My mind can’t even comprehend the idea of getting old and not being able to work anymore. Right now, I’m struggling to plan for the next 12 months, let alone the next few decades. But home ownership is something that’s nearer. I know I need to start now if I want to be able to afford a house in three years’ time,” she says.
Superannuation is not an ‘old person’ problem.
Rachel Hamlen, Head of Customer Experience at FairVine Super, says the lure of home ownership has been attracting a lot of younger members to the super fund:
“Superannuation is typically something you don’t really think about until you’re closer to retirement age, and yet you actually make the most gains from the system if you start making contributions on top of employer contributions from your 20s. This is especially the case for women, who don’t have it as easy when it comes to saving for retirement due to things like unpaid care, non-linear careers and the gender pay gap.”
The First Home Super Saver scheme is a great initiative for making it easier for Australians to get a head start on their house deposit, but it also engages people with their superannuation from an earlier age. “Saving for your future shouldn’t be complicated, and we’ve developed some amazing tools at FairVine to simplify the process and make superannuation a more equitable system for everyone,” says Rachel.
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