Your savings and property questions answered

I am planning to use a Tax-free savings account to save for my short-term goals, but I am aware that drawing from it impacts the compounding effect. Should I use this investment vehicle for a five-year savings goal, or are there other options I should consider? Chrisley Botha, Wealth Adviser, PSG Wealth, Paarl, Cecilia Square Stockbroking.

Firstly, well done on having a tax-free savings account (TFSA), which I believe every person should maximise as part of a holistic savings plan. The real value comes from allowing the investment to remain untouched for as long as possible so that the compounding effect can fully work in your favour. Withdrawing funds from a TFSA impacts the long-term compounding benefit and your lifetime contribution limit. In addition, if you exceed the annual contribution limit, there are tax implications, which is counterintuitive.  

When saving for a five-year goal or less, consider alternatives such as a flexible unit trust account with a conservative to moderate risk profile. With such a strategy, you are able to access diverse asset classes but within a managed risk approach. These options are generally better aligned to shorter investment horizons where preserving capital and maintaining accessibility are important. 

I suggest separating your short-term savings from your long-term tax-efficient investments and engaging with a financial adviser to support your overall financial plan.

I would like to buy my first property within the next few years. How should I structure my savings plan to prepare for the deposit on my home while ensuring that I also plan for my long-term goals? Patrick Duggan, Wealth Manager, PSG Wealth, Melrose Arch.

The answers to this question are defined by my understanding of your two objectives:

• Short- to medium-term – the deposit for a house “within the next few years”.

You should not be taking any risks (defined here as variability of returns) with short-term funds. Therefore, I suggest you either place the funds required for a deposit on a house in a traditional treasury solution such as a Call Deposit, Notice Deposit or a Fixed Deposit. Alternatively, for a yield ‘pick-up’ you might consider a conservative unitised investment such as a Money Market Fund or an Income Fund which Funds objectives are to achieve a return (yield) above that of a traditional treasury account.

Most important with this allocation is:

1. Capital preservation – you need to have an exact amount of money available for the deposit and you therefore cannot afford any volatility of capital.
2. Liquidity – you need to be able to access the money quickly to pay the deposit.

• Long-term – saving for your future self/your “long-term goals”.

I am assuming that you want to save towards your second goal over a much longer term. Thus, to meet this second objective, you should be allocating all or most of this money to primarily ‘growth’ investments, especially listed equities, which financial instruments have historically yielded inflation-beating returns – the real ‘enemy’. 

I would also recommend taking advantage of tax efficiencies wherever and whenever possible, for example, by investing through a pre-retirement vehicle such as a corporate pension or provident fund, or retirement annuity, followed by a tax-free savings account or further voluntary investments. 

I try to save from time to time, but have not been able to do so regularly. Do you have any suggestions on how I can get into the habit of saving, and at what point in my financial journey should I also consider investment options?  Shreekanth Sing, Wealth Adviser, PSG Wealth, Northcliff, Johannesburg.

Contributing towards your savings can feel overwhelming, especially in South Africa, where many people are dealing with the rising cost of living, fuel prices, and economic uncertainty. Therefore, it is vital to make saving feel manageable and realistic. 

The key to saving starts with your mindset. As the famous Jedi Master Yoda wisely once said: “Do or do not - there is no try”. It is a blunt reminder that saving is a decision; it’s about deciding to save and showing up for that goal every day with discipline and focus. The real progress comes from intentional, consistent effort. Here are some tips to help shape your saving habits: 

1. Pay yourself: Set up a debit into your savings or investment accounts every month (even if it’s R500). Importantly, you are building a habit.
2. Define your savings goals: Whether it’s building your emergency fund or saving for retirement, you become more driven to save when it is linked to a goal. Ideally you should save towards an emergency fund first (usually three to six months’ worth of expenses) before focusing on long term goals like retirement. It is important to maintain a plan that balances access to emergency funds while also having financial security when you retire.
3. Regularly review your lifestyle: Look to cut costs on non-essential costs that can be re-directed towards your savings.
4. Seek professional guidance: An adviser will help to tailor a financial plan according to your circumstances, which ensures accountability and includes regular reviews.

Every rand you save is a step towards control, security and freedom. Just take the first step, keep it simple and build from there. What matters most is that you start as time and compounding are powerful drivers of wealth creation.

I’m a commercial farmer and the risks we face are becoming more complex. What should the agriculture industry be focusing on to better protect our operations? Ryno de Kock, Head: Distribution at PSG Insure

Various factors are reshaping the agriculture risk landscape as farming businesses like yours are becoming increasingly exposed to production, financial and market vulnerabilities.

Unpredictable events such as drought, flooding or pest outbreaks compound the risks and impact. At the same time, maintaining yields on increasingly depleted soils is forcing a heavy reliance on precision agriculture technologies such as drone surveillance, automated irrigation systems and cloud-based farm management platforms. While these technologies improve oversight and operational efficiency, they also introduce an emerging category of risk exposure, including network outages, hardware failures, software errors and cyberattacks.

The consequences of a system failure or cyber incident can extend beyond loss of data, potentially disrupting operations or placing livestock welfare, food safety and logistics at risk.

Given the complexity of today’s agricultural risk environment, a tailored insurance portfolio should be layered to address the full range of exposures relevant to your operations. Working with an insurance adviser who understands the sector is critical to ensure that you are protected according to the specific nature and scale of your farming business.

PERSONAL FINANCE