The Bank account that pays you 17% to save for your first home.

Give your kids the heads up!

If you are thinking about buying your first home and don’t have a first home saver account, you are nuts. Ditto if your kids are young adults and you want to give them a helping hand. What you are missing out on is a handout of potentially $1020 a year and lower tax rates on your savings.

Consider a 32-year-old reader caught between saving for his first home and wanting to put more into superannuation. He’s saved about $8000 towards a deposit but the money is in a standard savings account. That means he’s paying tax on any interest at his personal tax rate, rather than the 15 per cent tax rate on a first home saver account.

What he is also missing out on is a “free kick” government handout of 17 per cent of whatever he puts in each year, up to a maximum of $1020, which equates to deposits over a year of $6000.

You will need to look beyond the big four banks to find one of these accounts. MoneySmart, the consumer watchdog website of the Australian Securities & Investments Commission, has a list of 12 providers. Mitchell Watson, research manager at research house Canstar, says the three accounts offering the best interest are Police Bank (4.15 per cent), IMB (3.82 per cent) and Teachers Mutual Bank (3.5 per cent).

You have to put in at least $1000 per year in any four financial years (these don’t have to be consecutive, so it could be done, for example, over six years). The account has to be kept open for four years. If you change your mind about buying a first home, the money has to be contributed to your super account and can’t be withdrawn. The maximum amount that can be kept in the account is $90,000.

The low tax rates in these accounts are often overlooked.