Planning for emergencies with tax free investments

12/02/2020

Ever heard the phrase: expect the unexpected? It’s such a worthwhile philosophy to adopt in your financial life. You can never predict when life will throw surprise expenses at you, so it pays to plan ahead.

Having an Emergency Fund means you can take things like car repairs, a spell in hospital, or even a spur-of-the-moment family vacation, in your stride. By putting money away each month, you build a buffer between unplanned-for expenses and your financial goals.

It’s hard to know exactly how much you may need as this depends on your average monthly spend, whether you’re married, if you have children and how secure your job is. A common practice is to have at least 3 months’ worth of monthly expenses stashed away, although some experts recommend even more.

Where to keep your emergency fund

There are many options when it comes to savings and investment accounts. As you start building an emergency stash of money, it's important to remember that you will need easy access to it when the need arises. Something like a MyWORLD Savings Pocket or an African Bank Tax-Free investment account would do the trick. These hold the added bonus of SA’s best rates, meaning your emergency fund will grow as your interest accumulates.

A good strategy to follow is to set up a small emergency fund in a separate Savings Pocket. This will allow you to cover for those small emergencies that would normally mess up your budget. Once you've built up sufficient cash savings, you could continue building your emergency fund using a Tax-Free investment. 

Tax-Free investments are a great way to invest money, especially since they don’t carry the burden of paying tax on the growth. This is particularly useful when the investment is left for a few years and can grow exponentially.

How to open an investment account

Opening a Tax Free investment account has never been easier. New and existing customers can apply online through the African Bank website without having to visit a branch at all.

 

Ways to invest money

There are many ways to invest money and it's important to do so according to your needs. Some of the best short term investments include Savings Pockets, Notice Deposit accounts, Fixed Deposit and Tax-Free investments. Knowing your intention behind the investment will guide your decision. 

If you need an investment where you can easily access your funds, then you should look at Tax-Free investments. If you don't need immediate access to your money, then a Notice Deposit account or Fixed Deposit investment may be more suitable.

You can also decide whether to set up a monthly debit order from your account to fund your investment or you may simply invest as you can afford to. 

Some investment tips

  1. Invest regularly with as much as you can afford. Not only does this build a healthy habit of investing, but it also enables you to reap the rewards of compound interest.
  2. Have a plan for each investment. Not knowing what the money is for can make it more tempting to spend.
  3. Create a financial plan for the next few months. This doesn’t need to be overly complicated, but will rather act as a guide to help you with financial decisions. Keep track of your finances each month and cut back on non-essential expenses. That money would be better spent creating the kind of safety net that allows you to live your life with confidence.

Take full advantage of Tax-Free investments by making sure you understand the annual and lifetime limits and how these are affected when you withdraw money

Up Next

How to save money monthly
Many people are unsure of the best way to save money. As a result they’re not saving smartly, or not saving at all. Follow this guide on how to save money monthly.

Publish Date: 07/03/2019
Read more
Budgeting is as easy as 50/20/30
While most people know that a budget is necessary, many simply don’t know how to put one together. We’re here to tell you, drawing up a budget isn’t as confusing as you think it is.

Publish Date: 19/03/2020
Read more
Investing in women: An African Bank priority
Many women are now the main breadwinners in their families and form the support structures of their communities.

Publish Date: 01/12/2017
Read more
Three types of credit card fraud – and how to protect yourself
Read this blog post to familiarize yourself with these scams and know how to protect yourself.

Publish Date: 17/04/2018
Read more
Know your rights when applying for a loan
With times being so tough for many consumers, applying for a loan could give you the means to change your circumstances.

Publish Date: 17/04/2018
Read more

About African Bank

Our mission is to be a successful Retail Bank offering a wide range of products and services to the consumers of South Africa. The people who work for African Bank represent the diverse population of South Africa; therefore we are a reflection of you, of all South Africans. We seek to provide value - more than our consumers expect of us. We promise to live our purpose 'humanity through banking' in all that we do and we are confident that we can, because 'We are You'.