Before you get excited about the recent Government budget that suggests that first home buyers could access their superannuation as a deposit for a home, just take a breath and think about this…

I was reading an article by Tegan Taylor and Michael Janda and this is what I learned….

According to the Australian Bureau of Statistics (ABS) an average 25 to 34-year-old earns  around $75,000 a year.

That means the 9.5 per cent compulsory super contribution is $7,125 per annum, this is what the employer contributes for your retirement.

With the Government plan that you can divert three years of super contributions into a home deposit saving fund, as long as you match that with an equivalent amount of savings from your after-tax income you would then add another $7,125 per annum from post-tax income as the required co-contribution.

If that money is invested in a deposit account earning 3.2 per cent per annum, which are the higher three-year term deposit rates at the moment, then the average person in this target age group for first home buyers could probably save about $45,545 after three years.

All of this means that you’ll have a deposit of around $45,545. If you were hoping to live in Sydney, Melbourne, Darwin or Canberra and use that money as a 20% deposit, then you’ll be disappointed to know that there are no suburbs that have a place where you can do this.

If you’re prepared to spend 50 – 60 minutes travelling to the city then you will find some suburbs in Sydney or Melbourne where it’s possible to get a small house or apartment for a 10% down payment. Of course you will also have to pay the extra cost of lender mortgage insurance (which only protects the bank, not the borrower, from loss).

Adelaide, Perth, Brisbane and Hobart have some better options and are worth looking at if you live in those cities.

Foregoing a few years of super at the beginning of your career almost seems a sensible idea. However because of compound interest, losing three to five years’ worth of super early in your working life is the equivalent of losing seven to 12 years at the end of your career, according to Industry Super chief economist Stephen Anthony.

I guess if you’re prepared to work until you’re 70+ to catch up the money you spent at the start of your super fund, then maybe it’s a workable solution for you. Working that bit extra also means you’ll certainly be able to have your home loan paid off by the time you retire.

Whichever way you choose to get a deposit for a home of your own – you’ll still need a budget to make sure that you’re financially safe throughout your whole life as well as your working life.

©   Carmel McCartin – Budget Bitch

And don’t forget – (The views expressed in this blog are the personal opinions of the author. Don’t rely on them to make financial decisions; you have to make up your own mind. If you don’t like the content – then either stop reading or send me an email)