Millennials, born between 1981 and 1997, have a significantly higher appetite for tax-free savings accounts than the average banking customer.
According to FNB data, Millennial customers make up a large proportion of consumers who hold its Tax-Free Savings Accounts and they have a higher proportion of Tax-Free Savings Accounts compared to the bank’s total customer base.
Tax Free Savings were introduced by National Treasury in 2015 as an incentive to encourage household savings. In 2017, National Treasury increased the maximum savings contribution per year from R30 000 to R33 000, with a lifetime limit of R500 000.
Himal Parbhoo, CEO of FNB Cash Investments for Retail says for a consumer base that’s not necessarily known for its perennial savings habits, the trend in Tax-Free Savings gives an indication of improving financial habits of young South Africans.
“Society is accustomed to a belief that young people are perpetual spenders with little to no savings appetite. However, our stats suggest that young people are aware of the incremental benefits of being frugal with their money. It’s our view at FNB that the advent of digital innovation in the distribution of savings solutions is playing an effective role in providing easier access to Millennials and the broader population,” he says.
Here’s an overview of how Tax-Free Savings Accounts work:
- You don’t have to pay income tax, dividends tax or capital gains tax on the returns;
- You benefit from compound interest the longer you keep your money in the accounts;
- Parents can invest on behalf of their minor child;
- A minor child can have their own or individual annual or lifetime limits;
“With VAT having gone up earlier this year, consumers should be taking advantage of every opportunity to get some reprieve from the tax burden. Young people, in particular, have the benefit of time to build a savings culture to attain financial independence. While cash savings vehicles are convenient for short-term needs, it’s important for this group of customers to also consider long-term investment options when looking at tax-free investment accounts,” adds Parbhoo.
FNB offers consumers a range of Tax-Free Savings and Investment accounts, including: Tax-Free cash deposit, Tax-Free shares and Tax-Free unit trusts. The bank says consumers can benefit from every bit of growth, by paying no tax on savings or investments, dividends and returns with any one of its Tax-Free Savings solutions.
