Here is a simple strategy that can give your kids a “financially independent” future. Just a small investment in a TFSA at the start of a child’s life can turn into life changing money by the time they retire.

This strategy uses the power of compounding and no tax payable on the growth to generate a significant income for life.

To illustrate the power of this simple tax-free strategy let’s look at a couple of TFSA scenarios.

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TFSA Scenario #1: You max your annual contribution until you hit your R500,000 lifetime limit

Let’s start with the assumptions using the TFSA current rules:

• the maximum contribution of R36,000 every year,
• a total contribution of R500,000 over 14 years, and
• You invest 100% in the S&P500 and achieve an estimated annual return of 14%

The results are interesting:

• 18 years of growth – R2.6 million
• 25 years of growth – R6.5 million
• 65 years of growth – R1.2 billion

Now obviously R1.2 billion in 65 years will be worth less than it would be today due to inflation, so let’s look at the real returns. used at a 6% inflation rate. This is the Real Value after:

• 18 years of growth – R1.3 million
• 25 years of growth – R2.2 million
• 65 years of growth – R47.5 million

Historically, R47.5 million in today’s money could generate a monthly income of R190,000 indefinitely.

That’s after inflation and taxes.

R190,000 per month, in after tax money, is a very, VERY good living.

Scenario #2: Just put R36,000 away… once

Now obviously not everyone can afford to invest R500,000 per child.

So, let’s look at a single investment of just R36,000 once off at the start of a child’s life.

• total contribution is R36,000, and
• You invest 100% in the S&P500 with an estimated annual return of 14%\

Here are your returns over the same periods:

• 18 years of growth – R380,000
• 25 years of growth – R950,000
• 65 years of growth – R180 million

And if we take inflation into account again:

• Real value after 18 years of growth – R144,000
• 25 years of growth – R 247,000
• 65 years of growth – R5,3 million

You could draw a real after-tax income of R21,000 per month indefinitely from R5.3 million.

What blows my mind, is if you put away R36,000 using this strategy today, in future your child will be able to draw a significant portion of your single initial deposit… every, single, month… forever!

That is just incredible!

If you’re interested in setting up this type of investment for your children, or even your grandchildren, please feel free to contact me directly on [email protected].

You can use the PROMOCODE: TFSA2023 in the subject line, and I’ll know exactly what to do.

The numbers are clear. The sooner you start investing, the better the returns will be.

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