There has been a lot of talk about the (relatively) new tax free savings accounts, so I thought I would reflect on how best to “seize this opportunity.” Each person can put a maximum of R30 000 a year into a tax free savings account. That means my children and I could each be doing this.
Last year I cashed in a pretty ineffective scheme for paying for tertiary education and I put that money straight into a tax free savings account, which I add to every month. So last year was easy and I did ‘the right thing,’ but what about this year?
I don’t have R30 000 to pop into an account (and sadly nor do my children!) so I began to wonder if this tax relief only applied to the super-rich who have R30 000 a year to save? Then I realized I clearly didn’t understand this tax free savings thing very well.
I spoke with Simon (yip, of Just One Lap) to get his advice, and he was very clear that each year I should sell R30 000 worth of my ETFs and buy ETFs through a tax free savings account. This took me a while to understand, but then I got it. Wow – that’s easy, and now I realise that even for the middle class, if you have ETFs or shares, you can make this tax free saving work for you. And I can do this every year.
So have you opened your tax free savings account this year?
In my next column I’m going to talk about annual increases – I am very lucky to be getting one this year, what should I do with it?
Below is the Power Hour Tax Free Video Simon did back in February and you can find the list of ETFs one is able to include in a Tax Free Savings Account here.