Mapalo Makhu
Mapalo is a renowned personal finance expert, bestselling author of You’re Not Broke, You’re Pre-Rich, and the founder of Woman & Finance (www.womanandfinance.co.za), where she empowers individuals to achieve financial confidence.
We are well into 2025. The dust of January and February expenses has settled, and now we can finally take a step back and think about our financial goals for the rest of the year.
One of the most common goals people set for themselves, year in and year out, is to start saving and investing—but many don’t really know how or where to begin.
If you want to build a solid financial future, you must include both saving and investing in your financial plan.
Saving vs Investing
Many people use the terms “saving” and “investing” interchangeably, but they serve different purposes.
Saving is for short- to medium-term goals, such as:
- A holiday or big-ticket purchase like a fridge, car etc
- Your child’s school fees for the following year
- A deposit for a home or rental
- An emergency fund (this is crucial!)
The Importance of an Emergency Fund
An emergency fund is your financial safety net. It prevents you from:
- Getting into debt when an unexpected expense arises.
- Dipping or cashing-out your long-term investments when you need cash urgently.
An emergency fund should ideally cover 3–6 months’ worth of your expenses. So, if your monthly expenses are R5,000, for example, your emergency fund should be between R15,000 (3 months) and R30,000 (6 months).
I know this benchmark can feel overwhelming and daunting, but think of it as a goalpost, not an overnight task. Start small—maybe aim for your first R5,000. Windfalls like a bonus or a tax refund from SARS can help you build it up faster.
Your emergency fund should be easily accessible but still earning some interest, consider putting it in a high-interest savings account (separate from your daily banking account), a money market account or in your access bond (if you have a home loan), thereby lowering the interest on your bond as well.
Now that we’ve covered savings, let’s talk about investing.
Investing is a long-term game, typically 5, 10, or even 15+ years. If you’re serious about building wealth, one of the best investment vehicles available is the Tax-Free Savings Account (TFSA). But here’s the thing—a TFSA is NOT meant for short-term savings! Despite its name, it is actually an investment tool designed to help your money grow tax-free over time. I am a big fan of TFSA; I have one, and so do my two young boys.
How Does a TFSA Work?
- With a TFSA, you keep every cent of your returns! Meaning no tax on interest, no tax on dividends, and no capital gains tax. Whether your investment grows for 10, 20, or even 30 years, when you finally cash out, every rand is yours to enjoy—100% tax-free!
- Annual contribution limit: R36,000 (or up to R3,000 per month). Lifetime limit: R500,000 – Once you reach this, you can no longer contribute, but your investment can still grow without limits.
- No rollover of unused contributions – If you don’t use your full annual limit, you lose it – you can say you will contribute more the following year!
- Flexible investment options – You can invest in ETFs and unit trusts.
How to Stay the Course with Your Investments
One of the best ways to ensure you stay consistent is by automating your savings and investments, by this I mean setting up a debit order to transfer money into your TFSA every month—this removes the temptation to spend the money elsewhere.
If R3,000 per month sounds like too much, don’t stress! Many financial services companies allow you to start investing in a TFSA with as little as R100 per month. The key is to start—even small amounts will grow over time.
And since the new tax year has just begun, what better way to start your investment journey than with a TFSA!