With a Tax-Free Savings Account, South Africans can now save and invest R33 000 per tax year (previously R30 000 per tax year) and R500 000 in their lifetime, tax free. This means that depending on the type of Tax-Free Savings Account you choose, you benefit by keeping all the growth by paying no tax on interest earned or dividends and returns received.
lse Smuts, Head of Marketing at FNB Cash Investments says, “In times of greater market uncertainty and increasing cost of debt, it is particularly important for people to build up their savings, and with a Tax-Free Savings Account they can do this, tax free.”
Seeing as successful savings depends on: how much you save, and how long you save it for, it makes sense to seize this opportunity while you still can.
Top tips on achieving your savings goals in 2017:
Always have a savings goal
Whether this is a short-term goal for buying a new pair of sneakers, or a longer-term goal such as education, buying a house or a comfortable retirement, you are more likely to succeed at saving money if you have a savings goal.
For bigger investment goals, break them down into achievable milestones. It’s more manageable to have a monthly savings goal that adds up, than to consider the larger amount you want to save over the course of a year. So in the case of a Tax-Free Savings above R33 000 per tax year might look overwhelming, but saving R2 750 per month could be more achievable.
Decide if your savings goal is realistic
One of the reasons South Africans need to save more is because we are too reliant on debt to bail us out in emergencies. That said, assess your savings goals and make sure they are realistic, especially in light of any debt you need to pay off.
Choose the right savings account for your goals
First things first – when you receive your salary, transfer the amount you budgeted to save into a savings or investment account that is not meant for day-to-day expenses, so you won’t be tempted to spend your savings on unnecessary indulgences. Better yet, set up a scheduled payment that goes off automatically before your other monthly payments so that you get into a savings habit even faster.
Review and update your goals regularly
Once you get started, review your goals regularly: if they are too easy, you could be saving faster, so increase your monthly goal.
“Reassess and reset subscriptions that go off your account monthly. Work out what you need, versus what you want. Set yourself and your household a budget, and stick to it. Make sure you are paying off your most expensive credit first, and consolidate your debt to make it more manageable,” says Smuts.