For every South African who dreams of reaching their financial goals, tax-free saving investments present an opportunity to get the most out of the money they put away.

The first thing every financial adviser should do is to make sure clients are taking advantage of tax-free saving investment portfolios. In a highly taxed country like ours, we need to make use of all possible tax breaks.

Accessing tax-free savings is very easy. For instance, on the SatrixNOW platform, it is as easy as choosing to deposit funds into the tax-free account option. From there, the funds can be allocated to a product – exchange traded funds (ETFs) or unit trusts – that suits the client’s risk profile.

And, rather than trying to put as much money as possible into tax-saving investment vehicles at the end of the year, using time wisely is a lot more beneficial. Putting away a small amount every month will lead to much more growth of an investor’s money than trying to save a lump sum at the end of each financial year.

ETFs and balanced funds are both good options for tax-free savings. ETFs track an index, giving clients a similar performance to the stock market over time. Multi-asset class funds, also known as balanced funds, are great for lower risk appetites as they help weather volatility.

If an investor commits to contributing as much as possible to their tax-free savings account, they’ll reach their lifetime limit in just under 14 years. If they faithfully invest monthly, maximise their contributions, and use the best investment vehicle for their needs, tax-free accounts can make a game-changing contribution to their retirement in the future.

Once the investor decides how to invest, there are just three more points to remember. Firstly, invest for the long term – the longer you stay invested, the more substantial tax saving becomes. People only typically start seeing the returns match or exceed their contribution after about 10 years, and thereafter, after 20 years the value of the tax saving becomes relative.

Set in place a strategy for clients that helps maximise the gift of time and compound interest. Next, encourage them to make no withdrawals. Instead, remind them to view this investment as part of their long-term investing plan. Lastly, make use of a retirement annuity to also save on tax. Up to 27,5% of an annual income can be contributed to a retirement annuity and clients pay less and less tax as their contributions increase.

Article credit How to do tax-free saving right in 2023 | MoneyMarketing (b2bcentral.co.za)