advice on TFSA

johnspake said:
Based on what you said, would purchasing ETFs in my TFSA (tracking international indexes) be a good option for my rainy day fund? I'm in the same boat where I don't plan on staying in SA in the long-term but I need a place for my rainy day fund. A lot of people have recommended TymeBank but this is only available for SA citizens and PR holders, which I'm neither. Interest rates in the bigger banks suck at the moment.
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Unfortunately TFSA will not work for you, you will be best served by the highest interest easy access account available to you. Equities and Retirement vehicles are all long term investments, that are not suitable for short term 3-6 month rainy day funds.
 
newby_investor said:
IMO there's not a lot of reason to keep rainy-day funds in a TFSA. You ideally want to make maximum use of the no-tax on the growth of your assets there.

Rainy-day funds that you may need to withdraw immediately if there's an emergency should be kept in a place that is more easily liquid. So the ideal place for many people is a bond if you have one, or a money-market account with your usual bank. Tyme can fit the purpose but all the big banks have savings options.

If those weren't available for whatever reason, but an Easy Equities account was, then what I'd do is invest in NFTRCI on the normal ZAR account (i.e. not the TFSA). That's just an ETF which invests in the major banks fixed deposits and you get the interest from that. So it's effectively a money-market account in an ETF disguise.

I keep my TFSA for money that I intend to grow for long-term (in my case supplementing my work pension). I keep it in offshore funds, (especially if I weren't planning on staying in South Africa for a long time). Unlike a pension / retirement annuity, funds can be withdrawn at any time, but I have not done so and don't intend to unless it's a real emergency.

(Usual disclaimers, I'm not licenced to give financial advice, this is just some info about what my approach is and what I'd do if I were in your shoes.)
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Thanks for your advice, much appreciated :)

What you said does make sense - ideally I shouldn't be using my TFSA for rainy day funds. One reason I thought of doing that is because I can only invest in ZAR-based assets (unless I'm mistaken) for my TFSA. When you say you keep your TFSA in offshore funds, do you mean investing in ZAR-based ETFs that track international indexes or completely offshore? The most ideal solution for me would be to have investments in my TFSA entirely offshore i.e. in USD. Is this possible? I don't think so but just making sure :)
 
RVQ said:
Unfortunately TFSA will not work for you, you will be best served by the highest interest easy access account available to you. Equities and Retirement vehicles are all long term investments, that are not suitable for short term 3-6 month rainy day funds.
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Thanks! I agree with what you say. Any suggestions for the "highest interest easy access account"?
 
johnspake said:
Thanks for your advice, much appreciated :)

What you said does make sense - ideally I shouldn't be using my TFSA for rainy day funds. One reason I thought of doing that is because I can only invest in ZAR-based assets (unless I'm mistaken) for my TFSA. When you say you keep your TFSA in offshore funds, do you mean investing in ZAR-based ETFs that track international indexes or completely offshore? The most ideal solution for me would be to have investments in my TFSA entirely offshore i.e. in USD. Is this possible? I don't think so but just making sure :)
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Yeah, ZAR-based foreign index trackers. Not quite as good as proper offshore investments but for my purposes makes very little difference. Not for emergency money, but longer time horizons.

There aren't any foreign currency based tax-free accounts (for South Africans anyway) because as soon as you buy dollars or euros or whatever, the money is considered "offshore" and local financial offerings don't really apply.

Some other countries do offer similar investment packages but they are typically only available to citizens. Any kind of offshore exposure is really only suitable for long-term investments due to volatile currency movements. And the ZAR is among the most volatile unfortunately.
 
newby_investor said:
Yeah, ZAR-based foreign index trackers. Not quite as good as proper offshore investments but for my purposes makes very little difference. Not for emergency money, but longer time horizons.

There aren't any foreign currency based tax-free accounts (for South Africans anyway) because as soon as you buy dollars or euros or whatever, the money is considered "offshore" and local financial offerings don't really apply.

Some other countries do offer similar investment packages but they are typically only available to citizens. Any kind of offshore exposure is really only suitable for long-term investments due to volatile currency movements. And the ZAR is among the most volatile unfortunately.
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Thanks so much for the useful info you have been providing!
 
Just reviving this thread as to not make a new one.

My question is as follows:

If I sell all of one particular TFSA ETF and use that money to buy another TFSA ETF, does that mean I am contributing to my TFSA again?
 
SergioDomngos said:
Just reviving this thread as to not make a new one.

My question is as follows:

If I sell all of one particular TFSA ETF and use that money to buy another TFSA ETF, does that mean I am contributing to my TFSA again?
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No, its all internal. If the money dont go “out” the product, its just buying and selling
 
SergioDomngos said:
Just reviving this thread as to not make a new one.

My question is as follows:

If I sell all of one particular TFSA ETF and use that money to buy another TFSA ETF, does that mean I am contributing to my TFSA again?
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No, as @zerocool2009 said, it's an internal transfer. Just make sure you don't withdraw the amount at all.

It's easy on EE.
 
The rule is simple. Lets say you have tfsa account, and you eft in, its seen as contributions

If you they pay interest or dividends out, its within, you can reinvest, its not seen as contributions

If you sell and buy more, as in within... its not contributions

As simple as that
 
I agree with TFSA as a +20year investment product to see any real gains.

To reach R500K you will need 13 years of maxing out your annual TFSA limit. So if you plan on cashing out within that 20 years you not using the product to its full potential.

I disagree about 33k being an unrealistic amount to save for the average Joe. That's about 3k pm. If you contributing to a RA or pension then maybe you can be excused. But majority of the time people live above their means.
 
Can anyone please tell me what happen if you invest more than the annual limit of the TFSA for minors? i.e. Minors who don't have a tax number
 
TheTraveler said:
Can anyone please tell me what happen if you invest more than the annual limit of the TFSA for minors? i.e. Minors who don't have a tax number
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The annual contribution limit of R33 000 per individual is strictly enforced, and any contributions in excess of this annual limit can be subject to penalty tax of 40% of the excess. Investors should therefore manage their TFSA contributions carefully to ensure they remain within the limits, particularly where they operate multiple TFSAs across different platforms. The annual contribution limit of R33 000 applies to the sum of all the contributions to a person’s TFSAs.

Source: https://www.moneyweb.co.za/financial-advisor-views/making-sense-of-tax-free-savings-accounts/
 
Speedster said:
The annual contribution limit of R33 000 per individual is strictly enforced, and any contributions in excess of this annual limit can be subject to penalty tax of 40% of the excess. Investors should therefore manage their TFSA contributions carefully to ensure they remain within the limits, particularly where they operate multiple TFSAs across different platforms. The annual contribution limit of R33 000 applies to the sum of all the contributions to a person’s TFSAs.

Source: https://www.moneyweb.co.za/financial-advisor-views/making-sense-of-tax-free-savings-accounts/
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Thanks. Wondering if the same applies to my 4 year old kid who has a TFSA in his name? He doesn't have a tax number or anything of the sort as yet.
 
Speedster said:
How does he have a TFSA without a tax number?
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I am not sure how it works but I just applied on the old mutual site and they deducted the money from my account. The link below says it's not linked to my tfsa limit in any way.

Just not sure how they track how much is invested or if over-invested how the tax is charged.

Using a tax free savings account better | Transcript | Old Mutual

Learn about how you can use your tax free savings account more effectively in 2021, including how to invest on your children’s behalf.
www.oldmutual.co.za www.oldmutual.co.za
Screenshot_20220417-160852_Chrome.jpg
 
TheTraveler said:
I am not sure how it works but I just applied on the old mutual site and they deducted the money from my account. The link below says it's not linked to my tfsa limit in any way.

Just not sure how they track how much is invested or if over-invested how the tax is charged.

Using a tax free savings account better | Transcript | Old Mutual

Learn about how you can use your tax free savings account more effectively in 2021, including how to invest on your children’s behalf.
www.oldmutual.co.za www.oldmutual.co.za
View attachment 1293480
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OM likely registered the child for tax.

In slightly other news, why on earth would you have a TFSA with OM?!
 
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