How to give your child the retirement you wish you had| Investing long-term in a tax-free savings account with growth assets can set your child up to retire as millionaire. A retirement that they never have to save a cent towards. By mayaonmoney
Investing long term in a TFSA with growth assets can set up your child up to retire a millionaire
Assuming you invested R2 750 a month, you would invest R33 000 per year, which is currently the maximum annual amount allowed in a tax-free savings vehicle. The long-term average annual return from equities is around 7% above inflation. By the time the child turned 18 you would have invested R600 000, but the fund would be worth R1.1 million in today’s value, having adjusted for inflation.
According to Andrew, by the time your child is ready to retire that investment would be worth over R20 million in today’s value. Admittedly, not everyone has R2 750 a month to put away, but what if you just started with R500 a month? By the time your child turned 18 they would have a nest egg of R215 000.
According to Nic Andrew, executive head of investments at Nedgroup Investments, the JSE All Share Index over the long term has delivered seven percentage points above inflation. For example, if inflation is 5% then the JSE return would be 12%.
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