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Be Money-Smart with Tax-Free Savings

When it comes to money, it seems that taxes are part and parcel of every transaction that we make, every sale, and every earning. With no apparent end in sight to the inevitability of taxes, the introduction of tax-free savings and investments accounts in South Africa could not have come at a better time! Creating an investment portfolio is one of the most financially-savvy things that you can do for yourself and your family’s financial health. A good investment portfolio can fund your children’s education, a down payment on a new home and other medium to large expenses. Simply having a good savings pot will give you an added safety net in the event of an unexpected emergency.

How does a Tax-Free Savings account work?

The laws have allowed for individuals to invest up to R30 000 per year, with a total lifetime contribution into all Tax-Free Savings Accounts not exceeding R500 000. Tax-Free Savings Accounts include savings accounts, fixed deposit accounts, retail savings bonds, unit trusts and other tax-free products that are available from accredited financial providers.

All returns, dividends or capital gains from a Tax-Free Savings Account and investment account will be completely tax-free.

How many can you have?

You may have as many Tax-Free Savings Accounts across various financial providers as you wish, but bear in mind that your yearly investment cannot exceed R30 000 per month in total. Exceeding the annual limit will result in tax penalties.

When can you access your money?

Fortunately, your Tax-Free Savings money can be accessed at any time, allowing you to withdraw your money in the event of a financial emergency without any charges or tax implications.

It is easy to see why a Tax-Free Savings Account is a prudent and financially forward-thinking way in which to grow your money. First-time investors can use this new product as a fantastic starting point for investing, while seasoned investors will understand the markets well enough to use it as a beneficial addition to their portfolios. Although the yearly investment amount isn’t extravagant, with the right investment choices and calculated risks, you can potentially earn excellent dividends in the future. Because the Tax-Free Savings Account is new to the South African market, it is recommended that you do some research before settling on the right product. There are many financial institutions offering Tax-Free Savings and investment products; all that’s left to do is to choose the right institution and start growing your money, tax-free!

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