July is National Savings Month in South Africa, a time to reassess your financial strategy and enhance your saving habits. Discover effective ways to maximise your retirement savings, utilise tax-free accounts, and explore investment options like ETFs to build long-term wealth.
Image: File
July marks National Savings Month in South Africa, providing an important reminder that building financial security starts with developing consistent saving habits and making informed investment decisions. At a time when many South Africans continue to face rising living costs and economic uncertainty, it's an opportunity to pause, review your financial plan and ensure you’re making the most of the savings and investment tools available.
Whether you’re saving for retirement, building long-term wealth or investing for future goals, small, consistent financial decisions can have a significant impact over time. National Savings Month is the perfect opportunity to reassess your savings strategy and make sure your money is working as hard as you are.
Review your retirement savings
Retirement savings remain the primary and most tax-efficient way to build long-term financial security. Contributions to retirement funds are tax-deductible, up to the current annual limit of R430,000, making retirement annuities and employer-sponsored retirement funds valuable tools for both wealth creation and tax planning.
National Savings Month provides the ideal opportunity to review your retirement contributions and ensure they remain aligned with your long-term financial goals. Even modest increases to monthly contributions can make a meaningful difference over time, thanks to the combined benefits of tax efficiency and compound growth.
Maximising your tax-free savings account
A Tax-Free Savings Account (TFSA) is another effective way for South Africans to build a long-term investment strategy. By allowing investment returns to grow free from income tax, dividends tax and capital gains tax, a TFSA provides a powerful opportunity to maximise investment growth over time.
Investors can currently contribute up to R46,000 per tax year, subject to a lifetime contribution limit of R500,000. Making full use of this annual allowance, where affordable, can significantly improve long-term investment outcomes through the power of compound growth. For investors contributing through monthly debit orders, National Savings Month is a good opportunity to review contributions and ensure they remain on track to utilise the full annual allowance before the end of the tax year.
Consider ETFs as part of your savings strategy
July is also an ideal opportunity to explore investment solutions that make long-term wealth creation more accessible. One option that has grown significantly in popularity is the Exchange Traded Fund (ETF), offering investors an affordable, transparent and diversified way to participate in financial markets.
An ETF is a basket of investments, such as shares, bonds or commodities, bundled into a single fund and listed on the Johannesburg Stock Exchange (JSE). Like listed shares, ETFs can be bought and sold throughout the trading day while providing investors with instant diversification across multiple underlying assets.
ETFs have helped democratise investing by making it easier for more South Africans to access professionally managed, diversified portfolios. Whether you’re investing R100 or R10 million, every investor has access to the same fund, on the same terms and with the same management fees. This is an important step towards greater financial inclusion.
For investors looking to build wealth over time, ETFs can be an effective addition to a long-term savings strategy. Their relatively low costs, transparency and ease of access make them particularly attractive for first-time investors, while experienced investors use them to diversify portfolios across local and global markets. Unlike many traditional investment products, ETFs do not have multiple fee classes. Every investor pays the same percentage-based management fees, regardless of the amount invested.
As with any investment, understanding what you are investing in remains essential. Investors should take time to understand the underlying assets, the level of risk involved and how an ETF aligns with their long-term financial objectives.
Think globally through offshore diversification
A well-diversified investment portfolio extends beyond local markets. South Africans can currently invest up to R2 million per year offshore under the Single Discretionary Allowance without requiring SARS tax clearance, creating greater flexibility to diversify across international markets and currencies.
While offshore investing may not be appropriate for every investor, global diversification can help reduce concentration risk and provide exposure to sectors, industries and growth opportunities that may not be readily available in the local market. As part of an overall savings strategy, it is worth reviewing whether your portfolio has the right balance between local and offshore investments.
Why saving consistently matters
One of the greatest advantages any investor has is time. Regular contributions, combined with the power of compound growth, can significantly improve long-term investment outcomes. The earlier you begin saving and investing, the longer your money has the opportunity to generate returns and, importantly, earn returns on those returns.
National Savings Month is a reminder that successful investing is about more than simply timing the market or chasing short-term returns. It’s about building disciplined saving habits, investing consistently and reviewing your financial plan regularly to ensure it remains aligned with your goals.
* Giles is the head of strategy at Prescient Fund Services.
PERSONAL FINANCE