A Tax-Free Investment (TFI) is a savings plan that can be used for a variety of objectives such as retirement, saving for your child’s education and emergency savings. It is also commonly known as a Tax-Free Savings Account (TFSA) and is available for adults and minors. Any investor should consider having a tax-free investment for its countless benefits. Apart from the self-explanatory advantage of not paying any taxes, there is also a compounding effect on the growth of your investment. 

For Example: If a parent invests on behalf of their child at birth and allows the investment to compound until the child reaches retirement age, that investment will be large enough for the child to have a comfortable retirement. 

The sooner you start investing and the more you invest each month, the bigger the compounding effect will be. 

It is also important to note that even though you can access your funds at any given time, you need to allow your investment to grow for as long as possible. This will help you to benefit from the compounding effect of your investment. 

What are the other benefits of having a TFI? 

• Your fund is professionally managed by highly ranked fund managers
• You can invest up to R3000 per month/R36 000 per annum towards your future goal 
• You have access to a wide range of funds 
• You also don’t pay any tax on interest or dividends 
• Your money is easily accessible in case of an emergency 
• You can start a Tax-Free Investment for every member of your family 

What are the contribution limits of TFIs? 

• Your investment is capped at R36 000 per annum and has a lifetime limit of R500 000. If you exceed your limits, your contributions will be taxed 
• Your investment return that exceeds the limit of R500 000 is not considered as a contribution and will be exempt from tax deductions 
• The annual contribution limits have increased in the previous years, and we are hopeful that will continue in the coming years. 

How to get started? 

You can start investing with Nedgroup Investments by clicking here and following the steps. You can also listen our podcast with Denver Keswell, Senior Legal advisor at Nedgroup Investments, who shares valuable tips and further unpacks the power of harnessing Tax-Free Investing.