ED­U­CA­TION

In­ves­ti­gates the best ways to put money aside for your child’s fu­ture

CityPress - - Busi­ness -

com­pany han­dles tax dec­la­ra­tions with the SA Rev­enue Ser­vice on your be­half, whereas with ETFs and unit trusts, when you sell them, any cap­i­tal gains have to be de­clared in your in­come tax re­turn.

When tax-free sav­ings ac­counts were in­tro­duced last year, I started think­ing about chan­nelling funds into a tax-free ETF or unit trust to save for my son’s uni­ver­sity ed­u­ca­tion. A tax-free sav­ings ac­count would save me more in tax and costs than a tra­di­tional ed­u­ca­tion pol­icy would, and I’d have the flex­i­bil­ity of in­vest­ing in a range of dif­fer­ent in­vest­ment houses and prod­ucts, in­clud­ing ETFs, unit trusts and bank sav­ings ac­counts.

The key is to make sure that the un­der­ly­ing in­vest­ment meets your time frame. If you are only putting money away for the next two to three years, you would want a lower-risk, money mar­ket-type in­vest­ment.

The gov­ern­ment RSA Re­tail Sav­ings Bonds would also be a good op­tion for this time pe­riod.

If you have a longer time pe­riod of be­tween five and 10 years, you could con­sider a bal­anced unit trust fund that in­vests across cash, prop­erty and eq­ui­ties.

For some­one like me, who has more than 10 years un­til my son starts ter­tiary ed­u­ca­tion, I am happy that an in­vest­ment in an ETF in­vested in a tax-free sav­ings ac­count meets my needs.

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