January is a great time to ensure that you and your family are making the most of your savings opportunities in 2019.
One easy and hugely effective way to do this is to top-up and maximise your annual contribution of R33 000 to your tax-free investment. And, for those investors who have not considered tax-free savings before, now may be the time to start.
What are tax-free investments?
Tax-free investments (TFIs) are a government supported initiative to encourage South Africans to save more. TFIs allow investors to invest a relatively small amount of money and take advantage of the benefits of compounding, especially over the longer term - without paying any tax on interest, dividends or capital gains. Your money can also grow faster in a tax-free savings account compared to a regular savings account because you don't pay tax on the investment return.
The annual contribution limit for an investor in a tax-free product is currently R33 000 in a tax-year. That’s R2 750 a month, or R500 000 over a lifetime (penalties apply for amounts over these limits). Therefore, it makes sense to invest the maximum amount each year to make full use of the tax-saving benefits.
Are there any other benefits to tax-free investments?
Convenience and flexibility
Apart from the tax-savings, which can be significant over the long-term, tax-free investments are convenient and flexible. You do not need large amounts of cash to invest in tax-free investments and you only contribute when you can. There are no penalties for taking a break from contributions.
Although it is absolutely best to leave your investment for the long-term, if you do require your money in an emergency you can access it.
Reach your savings goals
Tax-free investments are an excellent way to save for longer-term goals such as education or a down-payment for a house. This is because the longer your money is invested, the more your investment compounds and the larger your tax-savings will be.
Save for the whole family
The R500 000 limit is per person. That means you can open a tax-free investment for each member of your family. Just make sure you discuss this with your financial planner so that you are aware of the impact of the lifetime contribution limit.
How do you invest?
The tax-year for 2018 only ends on 28 February 2019, so there is still time to open a new tax-free investment or top-up an existing one. Keep these tips in mind:
- Do your research – chat to a financial planner about which tax-free investment would suit you best or use our online investment platform to help you.
- Look for TFIs that give you a choice of funds to invest in so that your investment is suited to your individual savings goal. Nedgroup Investments gives you access to a wide range of our award-winning funds.
- Look for TFIs that are backed by a reputable and award-winning investment house and provide good support – online and offline.
- You should be able to keep track of your investments anywhere, anytime via a secure online portal.
Investing in a tax-free investment with Nedgroup Investments is now just a few clicks away. If you have any questions you can also contact our client services team at email@example.com or 0860 123 263.