What is a TFSA?
A Tax-Free Savings Account (TFSA) is a special investment account introduced by the South African government in 2015 to encourage saving. The key benefit is simple: all growth in a TFSA is completely tax-free.
This means:
- No tax on dividends
- No tax on interest
- No tax on capital gains
- No tax when you withdraw
TFSA Limits for 2026
Understanding the limits is crucial to avoid penalties:
- Annual Contribution Limit: R36,000 per tax year
- Lifetime Contribution Limit: R500,000 total
What Can You Invest In?
TFSAs offer flexibility in investment choices:
- Exchange-Traded Funds (ETFs)
- Unit trusts
- Retail savings bonds
- Fixed deposits
- Some shares (with restrictions)
The Power of Tax-Free Growth
Let's compare a TFSA vs a regular taxable account:
If you invest R36,000 per year for 20 years at 10% annual return:
- TFSA: R2.5 million (all tax-free)
- Taxable Account: ~R2.1 million (after taxes)
Who Should Open a TFSA?
Almost everyone can benefit from a TFSA:
- Young professionals starting to invest
- Parents saving for children's future
- Retirees looking for tax-efficient income
- Anyone wanting to grow wealth tax-free
How to Open a TFSA
Opening a TFSA is straightforward:
- Choose a TFSA provider (EasyEquities, Satrix, Allan Gray, etc.)
- Complete their online application
- Provide FICA documents (ID and proof of address)
- Fund your account
- Start investing!
Common Mistakes to Avoid
- Over-contributing: Stay within the R36,000 annual limit
- Not investing: Don't just leave cash in the account
- Paying high fees: Choose low-cost ETFs
- Not starting early: Time is your greatest asset
Next Steps
Ready to start your tax-free investing journey? Here's what to do:
- Use our TFSA Growth Calculator to set your goals
- Browse our ETF Database to find suitable investments
- Open a TFSA with your preferred provider
- Set up a monthly debit order to invest consistently