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