Many South Africans are receiving year-end bonuses, with wealth and property experts stating that these funds can be used for long-term goals.
Thomas Berry, Head of Sales at PSG Wealth, said that many South Africans use their year-end bonuses as a way to exhale by catching up on debts or spending a bit more over the festive season.
However, Berry said that it is a good idea to focus on shifting this short-term fulfilment to long-term gain.
South Africans have been advised that instead of setting up a bonus, they should view it as a wealth accelerator.
Via investing in a portion in the “right way,” one can fast-track their progress towards long-term goals, including home, education, or even an earlier retirement.
The key lies in how South Africans use the tools available to them, especially retirement annuities (RAs) and tax-free savings accounts (TFSAs).
Both offer tax-free growth while one’s money remains invested, which means that there is no tax on the interest, dividends or capital gains in either of these investment vehicles.
Paying less tax on your investments means that they compound faster.
In a retirement annuity, one can deduct up to 27.5% of their taxable income each year (capped at R350,000), effectively lowering their tax bill while building their retirement fund.
Those tax savings can then be reinvested to further accelerate growth. Access is also limited until retirement age, typically 55.
TFSAs, on the other hand, are better suited for medium-term goals, with an annual contribution limit of up to R36,000, subject to a lifetime limit of R500,000.
Berry said that TFSAs are well-suited for goals such as funding a child’s education, paying a home deposit or creating a safety net for future expenses.
However, withdrawals permanently reduce your contribution limit, so it is essential to plan carefully before making any withdrawals.
TFSAs are also allowed to invest across asset classes, without the restrictions that apply to RAs via Regulation 28.
This enables South Africans to tailor their investment strategy to their specific goals and risk appetite.
Saving doesn’t mean one has to stop spending on life’s pleasures; even small amounts saved can still compound. That said, the earlier you start, the better.
Those who start saving R500 per month from the age of 20 will have roughly the same amount as those who invest R2,500 per month from 35.
Put it into a house
Another investment option for your year-end bonus is to invest in property, with the extra income providing a more effective way to strengthen your position when purchasing property in 2026.
A December bonus is also a good way for South Africans to enter the housing market, upgrade their home, reduce long-term borrowing costs and make mortgage approval easier.
“A December bonus can be a powerful tool for buyers looking to enter the property market,” says Giovanni Gaggia, CEO of Real Estate Services South Africa.
“By planning ahead and using this extra income wisely, buyers can strengthen their offers, reduce the size of their home loans, and in many cases secure more favourable mortgage terms.
Gaggia said that current leading conditions mean that deposits play a more meaningful role than ever.
Buyers with more substantial deposits often gain access to lower interest rates, better monthly affordability and improved negotiating power with both lenders and sellers.