By Cue Sibiya
Whether in big or small amounts, there are meaningful benefits to putting money away for something more important. Government continues to encourage savings and through the introduction of Tax Free Savings Accounts (TFSA) in 2015. All proceeds, which includes interest income, capital gains and dividends from these accounts is tax free.
These accounts can be put into Tax Free Savings and investments accounts or both. However, total contributions per year that qualify for tax exemption is R33 000 (R2750 a month) up to a maximum of R500 000 per lifetime, though the account balances including interest earned can exceed R500 000 in a lifetime.
Tax Free Savings Accounts help maximize on the tax relief, it is recommended to invest the maximum amount permissible every year for 15 years and allow your money to grow while earning attractive compound interest.
Tax Free Savings Accounts make excellent savings vehicles for education if parents open such an account when a child is born or an infant. Young people starting to save may also find such accounts useful for long term savings. Another great purpose for TFSA’s is to start an emergency fund. Financial Planning Professionals recommend that we all save up to six months’ salary as part of our emergency funds. We all need that safety net should we lose our jobs or need to fix that leaking roof or pay for our children’s major school excursion.
“Just start saving now, try today. We don’t have always have readily available funds to put away, but think of your daily spending habits and see if you can cut one less thing. You will be surprised how much money you can save toward achieving something more important by simply cutting out those little and often non-essential daily expenses,” says Nedbank Head: Transactional Products & Investment, Vanesa Palani.
Saving is a habit and this amount can be built over time especially if you set up a stop order to your TFSA. Many South Africans are investing in TFSA’s which offer low cost savings and a high tax free return, with the flexibility of a normal savings account when you need to access your money.
The Nedbank Tax Free Savings Account provides you with an opportunity to save your money and enjoy the proceeds, tax free. For a minimum opening deposit of just R50, you get competitive interest rates, free monthly or weekly stop orders, interest can be paid out or re-invested on a monthly basis.
You can make withdrawals (minimum R50) by providing 24hours’ notice and there are no monthly fees or commissions. You can also link your account to your electronic banking profile or and support a cause close to your heartwrrt3rw through our Affinities Programme at no cost to you.
“It’s important that we try to move away from the negativity around South Africa’s savings rate and get to developing innovative savings alternatives and reinforcing positive savings behaviour. Because its cost free, it is advisable that every member of the household should have a TFSA, whether big or small, as this is one of the best ways to save and see the benefits of your money growing tax-free immediately, “concluded Palani.