Advice for what to do with a surprise R100000

[sugahani]

Hi! I'm a student and and I was recently gifted R100000 by a godparent completely out of the blue.

I've never really dealt with large amounts of money, and have been living in an apartment owned by a family member while being able to mostly pay for my own food with income from tutoring. Before this I've not been able to build up savings, and I'm now finding myself woefully unprepared for what to do.

I don't have any expenses bar food, no car, insurance, etc. I would be grateful if anyone would be able to give some advice on how best to go about dealing with the money?

I spoke to a friend and they recommended EasyEquities and explained to me what a TFSA is. Additionally, they and another individual recommended Satrix MSCI World Feeder ETF. Is this a good ETF to use, and are there any recommendations on how to go about investing in ETFs?

Currently my plan is to set aside R72000 to put into the TFSA over the next two years and keep the remaining R28000 as a supplement for living expenses over the next two years where my income is not sufficient. I would really appreciate a proper explanation of a TFSA and any pitfalls regarding them, e.g., are there complications if one emigrates, how accessible are the funds in the TFSA, and are there fees associated with transferring invested funds from a non-TFSA to the TFSA?

I would appreciate any assistance.

 

[deb2002]

@sugahani Yes, that's a good idea.

I would also look at the Satrix S&P500 ETF and the Satrix Nasdaq 100 ETF. You can invest the money on Easy Equities by opening an account.

There will be some fees but not much. Maybe R100 in total for a 36k transfer. Make sure not to go over or you will be taxed at 40% on the amount you invested over.

Regarding withdrawals, you have a lifetime limit of 500k that you can invest. This money will never be able to be taxed and can grow substantially into the millions. However, if you withdraw early you will have effectively decreased your limit. Once you take it out of the TFSA you can't put it back in without decreasing the 500k limit so it's best to leave it until retirement.

Regarding emmigration, you can take it out or perhaps transfer it to another broker. I'm not sure how it would work. But either case a TFSA is a long term investments that's best to leave alone. Buy the ETFs, don't look at them, don't panic sell WHEN they drop, they always go back up in value. This investment is best if you're going to stay in south Africa in the long term. Nevertheless, even if you immigrate it's still a good place to start, and even if you take it out after 5 years (if you really really really have to and you're sure you're not coming back to SA), then you would have 5 years of tax free capital gains and potentially dividends depending on the ETFs you buy. The dividens can be reinvested as well.

 

[sugahani]

@deb2002 Thanks so much! All of that is incredibly good to know, particularly the ability to decrease the 500k limit. I appreciate your help/time, and will follow your advice

 

[deb2002]

@sugahani No problem. I'm glad you're taking initiative.

 

[samiradedas]

@sugahani Put it in a government bond and take the 5 year option,you can use that money to pay for transfer fees for your first property purchase it will be about R170k after 5 years.You won't get charged any tax on the interest since it will be below R23k if i remember correctly.