Your investing, budgeting, and insurance questions answered

I am a 30-year-old who is reasonably new to investing and feel a bit overwhelmed by my choices. I would like to ensure that I save enough for retirement, buy a house in five years and go on my dream holiday when I am 40 years old. What would you suggest I put my focus on to achieve these financial goals? Hennie Fourie, Wealth Adviser, PSG Wealth, Pretoria East

It’s great that you are thinking about retirement, among other things. The reality is that only 6% of South Africans are financially independent at retirement. 

First and foremost, it is important to determine your various needs – i.e., short term (1-3 years), medium term (3-7 years), and long term (7 years+). Your time horizon is mainly long-term, so the focus should largely be on growth assets (equities) as an asset class. The next step is to select the products that will suit those needs.

There are mainly three products that would be suitable to meet your long-term goals:

Tax-Free Savings Account (TFSA): In my view, this is a must-have for anyone with a long-term investment outlook. You can contribute up to R36 000 per tax year to this product, with a lifetime limit of R500 000. To maximise the benefits from this product, it is advisable not to make any withdrawals from this investment for short- or medium-term needs.

Retirement annuity (RA) or pension fund through your employer: This product offers tax benefits, as contributions towards an RA  are tax-deductible up to a limit of 27.5% of your total taxable income per tax year, with an annual limit of R350 000. In addition, although only accessible at retirement (except for the savings component), this product offers savings discipline and protection against creditors.

Unit trusts investment products: Your options are unlimited here, ranging from conservative (money market) to aggressive (equity funds) investment portfolios. For example, you can save in this vehicle for a deposit towards a property (medium term), your dream holiday, as well as for retirement (longer term). Unit trust investments offer flexibility to make withdrawals as and when necessary, without any penalties. 

Various other products are also available to suit specific needs, so it will be worth your while to sit down with a certified financial adviser who can guide you through this journey to financial freedom.

I would like to grow my emergency fund and invest in the new year. How do I strike the right balance between allocating my money for savings and my investments while maximising tax efficiency? Patrick Duggan, Wealth Manager, PSG Wealth, Melrose Arch 

A typical ‘rule of thumb’ is to place approximately three months' expenses in an emergency fund, which should be:

1. Low risk (defined as low/no variability of returns - also referred to as ‘volatility’).
2. Highly liquid, i.e., easily accessible. 

These monies may be placed in a bank account, for example, in a Call Deposit, a Notice Deposit, a Fixed Deposit, or in a Money Market unit trust with a unit trust management company. 

It is true that these short-to medium-term savings will generate taxable income in the form of interest, but tax exemptions will apply, and unless the sum is large and/or ‘parked’ for an extended period, then any tax liability should be minimal. 

I would be reluctant to recommend placing emergency funds in a tax-efficient investment vehicle such as a TFSA, which is designed for long-term investment purposes. This vehicle should, in my opinion, house ‘growth’ assets such as listed equities. 

Also, a reminder that in terms of accessing a TFSA:

1. There is no minimum investment term, and therefore, no restrictions or limitations on access can apply. 
2. There is no limit to the amount an investor can withdraw from their TFSA, and all withdrawals are tax-free. 

However, any reinvestments will be regarded as new contributions and will be added to the existing contributions to calculate the total contribution limits. For example, if an investor invests R36 000 at the start of the tax year and subsequently withdraws R10 000 in the same tax year, the investor will not be allowed to re-contribute R10 000 in that year.

As a family with two preschoolers, we are starting to consider the costs of tertiary education. Is it best to set up a tax-free savings account or a more formal education policy? What are the options? Therisa Broekman, Wealth Adviser, PSG Wealth, Vanderbijlpark Financial Planning  

Starting early is key when saving for education. Beyond tuition, families must budget for additional costs like sports tours, housing, food, entertainment, and possibly a vehicle. With the possibility of studying locally or abroad, financial planning becomes even more complex.

A TFSA is a great tool for building education funds. You can contribute up to R36 000 annually, with a lifetime cap of R500 000. However, I prefer reserving this account for retirement, where long-term tax-free growth offers greater value.

Consider a voluntary investment or an endowment.

Both options offer diverse fund choices and generally affordable fees. Endowments are life policies and taxed at a favourable flat rate of 30% (income) and 12% (capital gains) in the hands of the Insurer.  This also means that it is possible to nominate beneficiaries on the product. Voluntary Investments are taxed in your hands.  Capital gains tax may be triggered when you withdraw from a Voluntary Investment.

To protect your education savings plan, it’s wise to include life and disability cover. This ensures that, should you become unable to continue saving, there will still be sufficient funds available to support your child’s education journey.

As the festive season approaches, I am concerned about remaining within the allocated budget set out for our family holiday. Are you able to provide any tips or guidance? Gerhard Maré, Wealth Adviser, PSG Wealth, Somerset West Mall Ring Road Financial Planning

To stay within your predetermined holiday budget, the principle is straightforward: decide the total amount you can afford to spend this December, allocate it to specific categories, and then ensure the money for each category is only accessible for that purpose.

First, agree on a single total figure with your family/friends. This figure must be based strictly on your actual income and available savings once all essential household expenses, emergency-fund contributions, debt repayments and retirement savings have been secured. Any amount left after these non-negotiable commitments is what you can responsibly spend. Once the total is set, divide it into defined categories such as gifts, travel, food, entertainment, decorations, etc. With the limits established, apportion the money - either mentally or, far better, physically (i.e. different accounts) - into separate buckets (using Excel or a simple notebook also works fine). The aim is to prevent ‘spending tomorrow’s pizza money on today’s extra gift’. Move the allocated amounts into these buckets (mental or physical) as soon as your salary or bonus is received.

Always include a modest contingency of 5 to 10 % of the total budget for unforeseen expenses, because unexpected costs are bound to pop up. Treat this contingency as a separate category with its own limit; once it is gone, further surprises must simply be declined.

Just make sure that your budgeting does not prevent you from enjoying your holiday with your family. If everyone is respectfully committed to, and aware of the budget, you’ll be able to realise your plans without having to constantly stress about finances.

What are some of the insurance trends that have emerged in 2025, and what should we be aware of heading into 2026? Ryno de Kock, Head: Distribution at PSG Insure

Extreme weather events and infrastructure-related issues continued to have wide-reaching implications for the local insurance industry in 2025. The following trends are noteworthy:

The protection gap 

Too many people and small businesses still have gaps in their insurance cover. One storm, theft or unexpected incident can be devastating and for businesses, a single equipment failure or cyber breach can cause significant downtime and losses. But that means insurers are being challenged to innovate and tailor solutions. While working with a short-term adviser is a prudent move, ensuring you accurately account for the true value of what you need to cover is a large part of getting any claims approved and paid out.

Climate risks 

Droughts, floods and wildfires are no longer distant threats. We’ve seen this year how quickly they can hit homes and businesses and why it is essential to have the appropriate insurance in place. While warmer weather is setting in, there are still intermittent but extreme windy and rainy conditions around the country. Insurance should be seen as an all-weather safety net, provided it is aligned with current risks and maintenance on properties is kept up to date.

With these in mind, consumers and business owners should work closely with advisers who truly understand evolving risks and can guide them in adopting risk mitigation strategies to head into the new year as prepared as possible.

PERSONAL FINANCE