Which Tax-Free Investment Account? Which one is right for you? What do you Know about Tax Free Investment Accounts? Did you know that ever since March 2015, the average South African has been afforded the chance to invest up to R30 000 a year – around R2 500 a month – in a tax-free investment instrument, up to a lifetime maximum of R500 000? Or that if a person was to do this faithfully up to that maximum investment amount in less than 20 years – around 17 to be precise – they’d have R500 000 plus capital growth, interests, and dividends, available to them as a tax-free investment?
The government made these rule changes in an attempt to encourage people in what is, unfortunately, a country with a very poor savings rate. The hope is that the allure of tax-free investments that allow people to save without incurring any tax on the growth of the investment will help people get into the habit of saving, especially when it comes to providing for their future retirement.
Which Tax-Free Investment Account?
Examining Your Options
As the idea of tax-free investment savings is a new concept to many they are often under the mistaken impression that a standard bank account is the best – or the only – type of tax-free savings account they should consider.
This, however, is far from the case, as there are a number of other great options that even a ‘novice’ investor should take a look at before making a final decision about just where they should begin investing their hard-earned cash. Tax-free savings products readily available as an alternative to standard cash deposit accounts include unit trusts, insurance products and exchange traded funds, and are offered by nearly all banks, unit trust managers, investment companies, and stockbrokers. Each of these offers something slightly different, but all can be considered potentially great choices
.Which Tax-Free Investment Account?
Don’t Be Afraid to Seek Help
Another misconception that many people have is that financial planners are folks who simply work for the mega-rich, those who have huge amounts of money to invest. Again, this is far from the case. Most of the work that most financial planners do is with the ‘average person’, rather than the jet-setting James Bond types that some of us imagine they work with. And even a single session with one of these financial pros can be very useful.
The reason that there is no such thing as a one size fits all ‘best’ tax-free investment tool for everyone is that everyone has different needs and expectations. Take retirement investing for example. If you are starting early your best investment strategy is likely to be very different than one for someone who has procrastinated about saving for retirement and is getting started just 10-15 years before they are scheduled to give up work for good.
Not everyone is hoping to use a tax-free investment tool to pay for retirement either. Some may be planning to save to meet a different goal, such as helping to pay for a child’s tertiary education or that second home abroad they have always dreamed of. Consulting with a financial planner will help anyone discover just what the best tax-free investment savings product for them is and get them started off on the right track to meet their savings goals.
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