Wondering how to rock that festive season bonus? Read this!

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Nonhlanhla Kunene | 01 December 2016

It’s midnight and that SMS you’ve been waiting for with bated breath arrives, bringing holiday cheer with news of that 13^th cheque in your bank account.

Logic comes to a screeching halt. Your mind is suddenly racing with a million thoughts on how to put that mini windfall to good use. Your head’s telling you “January school fees” but your heart’s telling you that hedonism rules: you simply have to have that one-of-a-kind lounge suite that recently melted your heart. Yes, the one that also comes with a one-of-a-kind price tag.

Silly season is upon us.

While most of us welcome the much-needed break from the usual routine, the festive season is unfortunately notorious for reducing thousands of South Africans to foolish spending followed by guilt and angst in Januworry.

Retail therapy can be fun, but a lot of those “absolute must haves” provide only temporary pleasure, especially when reality sets in and those financial obligations leap off the back burner to haunt you.

Sure, you’ve worked hard throughout the year and you’re more than entitled to a bit of spoiling, so go ahead and pamper yourself with that lounge suite. Provided it’s within your means and doesn’t burn a crater in your wallet, you deserve it. Just ensure that while shopping for life’s little pleasures, you include your financial wellbeing in your list of priorities.

With the investment options available to consumers, taking care of your financial future has never been easier and more affordable.

Of course, when choosing an investment vehicle, costs are an important factor. These can go beyond the usual account or investment management fees to include that dreaded tax on returns or capital gains. Thankfully the introduction of tax-free savings accounts (TFSAs) has made circumventing those taxes entirely possible.

With options ranging from basic savings accounts to slightly more complex investments on the stock exchange and zero tax charged on interest and capital gains, a tax-free investment is an ideal way to spoil yourself this festive season. For those fortunate enough to be able to invest the full R30,000 a year, the tax-free gains augmented by the almost magical qualities of compound interest can lead to a neat little windfall over the long term, as illustrated in our infographic.

Unlike the fleeting gratification of any of the “must haves” you’ll be rewarding yourself with this season, the cumulative returns from your investment (all tax-free, remember) are the reason why some have dubbed TFSAs the gift that just keeps on giving.  As long as you have some money in the account, it never stops working for you. And the cherry on top? You can access all or a portion of your funds as and when needs be.

So whether it’s boosting your savings to go on that early retirement away from the city, or saving towards your own “Top Billing” wedding; it doesn’t matter how big or small your dreams may be, there is a tax-free savings option for every goal.

*Returns on the infographic are based on a R2,500 monthly contribution with a conservative return of 7.21% – the expected 10-year average of an interest-bearing money market fund.