Three Reasons Why I am Considering Getting a TFSA

Sometime this week I sat in a brainstorming session with my colleagues and I got introduced to what I believe will be a game changer in my pursuit of financial freedom, a Tax Free Savings Account -  An account that allows you to invest up to R500 000 (lifetime contribution limit) without paying any tax on the profit you make on your investment, the dividends you receive, or the interest you might earn on cash. I know, right? But there’s a catch, your annual contribution may not exceed R36,000 in an annual tax period as defined by SARS, and you may not re-invest the money in the same account.

So here are three reasons why I am considering getting a TFSA:

1. It’s tax free with compounding interest: 

We all know the pain of seeing that amount on the tax section on any statement, so anything that will allow me take out tax-free savings and investments, attract zero tax at any point in the investment and, more importantly, when I cash out is a big win. In essence, with a TFSA you don’t pay any capital gains tax and no dividends tax. 

1. I can control what I invest

TFSAs are not fixed or or single set investments, allowing you to invest as little or as much as you want, giving you full control of how to split the annual tax-free allowance of R36 000.

1. There’s no age limit 

There is no age limit on how long you can hold a TFSA, ofcourse, by law, you have to be at least 18 to open a TFSA (though some bank policies may require you to be the age of majority in the respective province or territory in which you reside) to begin contributing. However, once the account is opened, you can continue to save and make contributions for as long as you want, or until you reach your lifetime limit. This allows you to continue saving and investing into your senior years.

Saving money for one’s financial goals is never easy when there are so many competing demands for it, but opening a TFSA is on my to-do list on my journey to building good money habits.

I am curios to know. Is this something you would look at getting? Comment below.