INVEST IN TAXFREE SAVINGS. HERE’S HOW

As the cost of living continues to soar, we’re constantly finding new ways to save. This is why we think it’s a good idea to consider a Nedbank Tax-free Savings account.

We’ve all been affected by this pandemic in different ways, and as we try to recover financially, Nedbank Head of Retail Investment Sisa Cikido says whilst you save, make sure your money works for you. “I always say that when you sleep, your money shouldn’t. It should grow wherever it is, and that’s the beauty of taxfree investing.” If you’re familiar with the term but not sure what it means, Sisa explains it’s when you grow your money without paying tax.

GLAMOUR: How do you invest in a tax-free savings account?

SISA CIKIDO: Our government introduced investing in a tax-free savings account in 2015 because South Africans are consumers. Also, it’s difficult for us to save, and we have to consider the plight we’ve been under, even before the pandemic. For that reason, our government has made saving attractive. And it’s not that difficult as you can start by investing very little.

When you invest your savings in an interestbearing account, its interest is taxable. If you’re under the age of 65, any amount under R23 800 isn’t taxable, but you pay capital gains tax on any interest that exceeds that amount.

The threshold is higher for investors over 65. You then have to start paying capital gains tax. But with a tax-free investment account, you don’t have to pay tax on the interest you’ve earned.

G: is there a specific amount i have to start with?

SC: You can open a Nedbank Tax-free Savings account for as little as R500; however, the annual threshold is R36 000. Ideally, this is the total amount you should put away each year to reach a lifetime threshold of R500 000, but you don’t have to put away R3 000 a month.

It’s about discipline, which I call the psychology of saving.

Sisa explains that with this type of account, it’s crucial not to withdraw from it so it can grow. “Let your interest compound,” she says.

And she cautions you’ll be taxed for any contribution over the threshold. “To make it easy for you, Nedbank doesn’t allow you to contribute over your threshold.” She affirms that even though investing takes time, the rewards are great.