This is why you should have a tax-free savings account in your portfolio

Now that Januworry has passed, it is time to turn back to one of the most important aspects of your finances that you might have neglected a bit while spending your money on festive activities and back-to-school expenses. Diane Behr, director at Foord Asset Management, says as we move into February 2026, it is worth revisiting some of the quieter building blocks of long-term investing – not the ideas that dominate headlines, but the ones that do the work steadily over decades, such as the tax-free savings account (TFSA). “Despite being available for many years (1 March 2026 will mark the 11th year since TFSAs were introduced), but they remain underused or are often not used to their full potential.

That is a missed opportunity, because the TFSA offers something rare in investing: growth that is never taxed.” As an investor, you can contribute up to R36 000 per tax year, with a lifetime contribution limit of R500 000. On their own, these numbers do not look particularly impressive, but Behr points out that the real benefit comes from contributing consistently and allowing time and compounding to do their work. Behr points out that all returns earned inside a TFSA, interest, dividends and capital gains, are completely tax-free.

This means every rand of growth stays invested and continues compounding year after year. Over long periods, the difference between taxed and untaxed growth becomes significant. She says contributing monthly also provides a small additional benefit as money is invested earlier and has more time to compound than if contributions are made once a year.

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In a relatively high-tax country like South Africa, avoiding tax on investment growth can quietly but meaningfully improve long-term outcomes, Behr says. “TFSA investments are exempt from Dividend Withholding Tax, which means dividends can be fully reinvested without affecting contribution limits. “TFSAs are also straightforward to open and manage, making them suitable for new investors as well as those with established portfolios.

While there are no lock-in periods, the greatest benefit is achieved by remaining invested for the long term. “However, one area that deserves more attention is product choice. A wide range of investments in South Africa qualify as TFSA products, from cash and income funds to balanced and equity funds.

While this flexibility is useful, it also means investors need to think carefully about how they use the structure.” Behr says because withdrawals cannot be replaced without depleting contribution limits, a TFSA is best viewed as a long-term investment, often for 15 years or more. “With such a long time horizon, the objective should generally be maximum long-term growth rather than short-term stability. Therefore, TFSAs are typically better suited to high-equity or growth-oriented portfolios.”

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