Traditional saving vehicles for first time home deposit miss the mark for young Australians

Traditional vehicles to save up for the first time home deposit are missing the mark for young Australians.

"It's important for young Australians to consider the effects of inflation and taxes when saving for their home deposits," says Co-Founder and Co-CEO Sahil Kaura.

"The traditional vehicle for getting into the market and saving up for your first home, the high interest savings account, just doesn't cut it anymore given the average time it takes to build your first home deposit."

According to the BankWest First Time Buyers Report 2017, it now takes 4.9 years for an average earning couple to save a 20% deposit, based on the average house price across all capital cities. For Melbourne those numbers rise to 6.4 years (and a deposit required of $153,008) averaged across all suburbs, while for Sydney it’s a staggering 8.2 years of disciplined saving to get to the $215,133 deposit required.

With the negligible returns from traditional saving vehicles like high-interest savings accounts, Kaura explains that automated investment apps - like Clover - are a reasonable investing vehicle for first time home buyers.

"With the average amount of time it takes someone to save up for a home deposit now approaching five years, it makes sense to build your savings out quicker investing that money into a diversified portfolio of assets," explains Kaura.

Australia’s home affordability woes have impacted a whole generation of young Australians now facing the daunting challenge of breaking into the property market.

Ownership rates among young Australians, particularly those under the age of 35, have experienced a significant decline over the last four decades, with 31% of Australian households renting, according to most recent Census data.

So it's not surprise that many young Australians are turning to alternative vehicles to save up for their home deposit.

"The way automated invest apps, like Clover, help young Australians get into the property market quicker is through the higher expected long-term returns from a diversified investment portfolio than the traditional high interest savings account," explains Kaura.

Clover customer Ophelie invested with Clover as a way to save up quicker for her first home deposit.

"I used Clover to grow and monitor my investments, and when the time was  right, I easily withdrew the funds and bought my dream house! Clover made it easy to see where my funds were invested and how they were tracking."

40% of Clover customers are investing to save up for a home; 80% of those are saving up for their first home.

"By using Clover, especially if you're saving for 5-6 years, you'll be investing your money in a diversified portfolio of assets that will help you grow your savings to get those keys to your dream home quicker," says Kaura.

Watch Clover Co-Founder Harry Chemay explain in Part 1 of our 3-part video series on housing affordability in Australia, what young Australians can do to get those keys to their dream home quicker. Download Clover's whitepaper on home affordability here.