4 Common money myths busted

Published on 20th March, 2019 at 03:18 pm

Myth 1: All debt is bad

There is such a thing as ‘good’ debt – debt you incur to invest in an asset (which should gain value over time). For example, the bond on your home. What’s crucial is that you’re accruing debt for something that will pay off in the long-run; that the terms of the debt repayments are fair and within your reach; and that you’re receiving credit from a regulated credit provider.

Myth 2: Try to get everything offshore

Yes, diversifying investments can help reduce your risk – but offshore funds don’t offer tax free benefits, and can have longer lead times for withdrawing funds. It’s generally a good idea to have some savings and investments onshore, for example, your Retirement Annuity (which will give you a tax benefit) and short-term savings you could draw from quickly, in case of emergency.

Myth 3: Children shouldn’t have to think about money

While kids shouldn’t grow up stressed about money, they should be learning about budgeting and saving – starting with your example. When you prepare your monthly budget, involve the kids by explaining your process (without going into too much detail):
“After I’ve paid for our monthly expenses, we have R1 000 left for fun stuff – what would you like to do?” helps a child see you’ve got a budget and how your priorities are set.

Encourage saving from an early age by giving children small amounts of money to save for short periods. Ask them what they’re saving for, even if it’s just a bag of sweets – setting goals helps encourage saving.

Myth 4: Tax-free benefits aren’t for everyone

“Tax-free savings options are limited to R33 000 per year, with a lifetime cap of R500 000,” explains certified and principal financial planner, Michael Atti.

But they can save you significant portions in tax each year. The good news: just contributing the minimum amount to tax-free savings or investments will let you tap into the tax-free benefits. Click here for free help filing your tax returns with TaxTim:

“SARS offers tax deductions when you make contributions to your retirement annuity, pension or provident fund,” explains Sechaba Bolofo, a registered financial planner and managing director of Lineo Financial Services.

“From 1 March 2016, tax deductions for retirement savings increased from 15-27.5%. This is allowed during the tax year and should be done before 28 February, before the new tax year.”

Get in touch with a financial planner to find out the best tax-free options suited to your needs.