Silindile Ngubo | Fund Accountant | Cannon Asset Managers | mail me |
As a parent you may be looking for special ways to treat yourself and your loved ones this festive season, but rather than spending your hard-earned money on soon-to-be forgotten toys or designer clothing, now is the perfect time to invest towards your child’s future with a Tax-Free Savings Account (TFSA).
Having recently become a mom, I have quickly come to know that as parents we want our children to have all the best things in life, and one of the key things that I would like to gift my child is a good financial future.
From the very first sight of my son, I made a commitment to provide him with everything that I myself was not fortunate enough to have. That’s why I’ve invested in a TFSA on his behalf. However you look at it, approximately 18 years of savings without any tax being charged on the growth or returns is a bargain.
Understanding TFSAs
TFSAs were introduced in 2015 to encourage and support South Africans in saving and growing their wealth.
Every person can invest up to a maximum of R33,000 each year (or R2,750 a month), and up to R500,000 over their lifetime in a TFSA without paying a single cent in tax on your investment’s growth and returns. This means that the investments are free of taxes such as Capital Gains Tax (CGT), and taxes on the interest and dividends earned, giving your savings a powerful boost over time.
Parents are able to invest in a TFSA on behalf of a minor child, but this investment will count towards your child’s lifetime limit.
Benefits of TFSA bundles
Those looking for a low-cost, simple and pain-free TFSA option, we recently introduced four unique TFSA investment bundles.
Each of our investment bundles features a tailored blend of Exchange-Traded Funds (ETFs) and Exchange-Traded Notes (ETNs) to match the specific needs, investment time horizons and risk appetites of different investors. ETFs and ETNs own or mimic the performance of companies in different sectors and regions, as well as well as asset classes such as cash, bonds, property and commodities.
The exact blend of asset classes in each bundle is optimised and actively managed by our investment team in order to carefully manage investment risk while ensuring investors are able to benefit from investment opportunities that may arise amidst changing economic, political and environmental circumstances.
The advantages of this approach are:
- Diversification: Through the use of ETFs and ETNs, our TFSA bundles are able to deliver effective and efficient asset class returns while spreading investment risk across and within asset classes, lessening the negative impact that any individual holding or company can have on the portfolio.
- Low-costs: Each of our TFSA bundles carries an Effective Annual Cost (EAC) of less than 1%. This includes transaction costs as well as asset management fees.
- No minimum investment amounts: Investors can choose exactly how much they would like to invest, whether this is R2 or R2,000 (within the annual and lifetime limits for TFSAs).
- Transparency: Investors can monitor the performance of the TFSA via the website and mobile app, including a detailed breakdown of costs and the performance of each of the individual ETF and ETN holdings.
- Simplicity: By offering the bundles on the our platform, investors are able to benefit from our streamlined, hassle-free investment process. Investors simply need to register an account on the website, activate the TFSA option, upload a scanned copy of their ID and proof of address (such as a recent utility bill, bank statement or signed lease agreement), and finally deposit funds into their live TFSA.