How much deposit do you need for a house?
The standard benchmark for a home loan deposit is 20% of the purchase price, which allows you to avoid Lenders Mortgage Insurance (LMI). LMI can add $10,000–$30,000+ to your loan costs and protects the lender (not you) in the event of default. However, it's possible to purchase with as little as 5% deposit using the Federal Government's First Home Guarantee scheme, which allows eligible first home buyers to borrow with a 5% deposit without paying LMI — the government guarantees the remaining 15%.
State-based first home buyer grants and stamp duty concessions further reduce the upfront cash required. The right deposit target depends on your purchase price, eligibility for schemes, and your risk appetite for taking on a higher loan-to-value ratio.
Building an emergency fund
Financial advisers consistently recommend holding 3–6 months of essential living expenses in a readily accessible account before directing savings toward long-term goals. An emergency fund removes the need to take on high-interest debt (credit cards, personal loans) when unexpected costs arise — and the cost of not having one, in terms of interest paid during a crisis, typically far exceeds the opportunity cost of keeping cash liquid. A high-interest savings account or offset account is the right home for an emergency fund — not investments, which may be down when you need to access them.
How to choose a savings rate assumption
For short-term goals (under 3 years), use a realistic savings account or term deposit rate — 4–5% p.a. is achievable in 2026 with a competitive high-interest savings account. For goals further out where you might consider investing, use a more conservative estimate to account for volatility: 6–7% for a diversified portfolio is a reasonable planning assumption. Avoid using recent returns as a guide — a year of 15% market returns followed by a -10% year averages to less than 3% real growth.