I have recently looked more into the First Home Saver accounts more carefully and thought I should share with you the tips that I've figured out about this strange financial life hack that most first home buyers have completely overlooked. One thing to realise is that not all banks offer the First Home Saver Account. For example, Bankwest does not offer the FHSA.
Here are five reasons why you should open a First Home Saver account.
1. Free money The first rule of the First Home Saver Account is that you must deposit $1,000 per year but the government will kick in an extra 17% into your account each deposit for a maximum of $850 total (ie where you deposit $5,000).
2. Good Interest Rates Of the banks that do offer the FHSA, the interest rate offered varies. The highest at the time of this post was Members Equity FHSA which offers 6.4% whereas ANZ and Commonwealth Bank offers only 5%.
3. You only need two years and two days Contrary to what you may have heard, you do not need to leave the money in for four years. Your account just needs to be open for FOUR FINANCIAL YEARS. So you can deposit $1000 on the 29th June 2010 and withdraw the money to buy a home on the 1 July 2012 and it will be considered four financial years.
4. Tax on interest is only 15% Interest is considered income so normally you can be paying up to 45% tax on your interest income so 15% tax on your interest is a good move.
5. Disciplined approach to saving The rules behind the FHSA are designed to also help people get into the habit of saving. This may be the best reason why you should open one of these accounts especially if you are still studying and are not likely to buy a house soon. Even if you do not buy a property in the end, you can use the FHSA balance at the end of the "four" years to deposit into your superannuation.
If you have any questions, you should call the First Home Saver account 1300 788 069.
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