“I wish someone had told me” is a series of posts that feed into our inquisitive nature at CN&CO. Each week we hear from someone in our network about something interesting or surprising that’s recently happened or occurred to them – or lessons they learnt. These blogs are a way to pay it forward and form part of CN&CO’s belief that the world can be a better place – and we all have a responsibility to make it so. This week’s post is by Carel who has spent the past weekend with his EasyEquities team mates as they took on 53 000 new clients. And while he wants to confirm that this blog is not advice, nor are returns guaranteed, his own experience with money and tax free savings accounts, qualifies him to share a few thoughts …

Many of us have over the years been admonished with the stinging criticism “Money does not grow on trees.” In other words, don’t waste money – it is a precious commodity.

When people said “money is not everything” in front of my late grandfather, he used to respond (in an Afrikaans drawl, a twinkle in his eyes, adjusting the hat he always wore and smoothing his braces holding up his farmer shorts) “true, but it is [insert a common, short, powerful Afrikaans expletive] far ahead of what comes second!”

Both my parents grew up in working class, farming families. And while, as white South Africans, they were still very privileged compared to the millions of black South Africans, they did not have the luxuries and benefits I had as a child (thanks to my mum and dad). My dad’s experience turned him into a man who is most generous with others but not himself. My mum’s experience caused her to also be most generous with others (stranger, family or friend) and herself – enjoying what we euphemistically call “the finer things in life”. And it seems I have a bit of both those world views – making me rather schizophrenic when it comes to money matters. On the one hand, I am a compulsive saver, squirrelling money away all over the place and trying my level best to not make debt, and yet, on the other hand, I too enjoy those fine things and being generous to those around me.

I have been thinking a lot about my attitude to money the last while. During these very trying economic times, more than ever before, all of us are tightening our belts and needing to watch – very carefully – what we spend and when. Daily I engage with people, via my role at EasyEquities, who entrust us with their cash. And as Easy reached a few milestones at the end of February, I thought I’d share some of my reflections.

Let me first share some of those milestones. On 1 March 2020, EasyEquities had over 300 000 registered users. In February 2019 alone, we had more than 10 000 new users join our community and were the custodians of over a quarter of a billion rand deposited by our users – many of whom are first-time investors, millennials, women and black (some may say “minorities” but I prefer to be clear and say – under served, neglected and previously patronized majorities). And during this past week or two, with markets taking a beating to reach low levels not seen since 2008 and our worldwide financial crisis, conventional wisdom (i.e that held by rich, white, economically educated and active men) says that users behave irrationally – withdraw cash and run for the hills. Not so the easy community, who are smart. They know investing is medium to long term. They share learnings. They patiently and consistently invest, save and grow their wealth. And that is crystal clear if you look at the EasyEquities Tax Free Savings Account (TFSA) stats.

TFSA became a thing in SA five years ago when the government introduced the ability to invest up to R30 000 a year (R500 000 over your lifetime) into Exchange Traded Funds (ETFs and for those who don’t know what these are – simplistically a collection of shares to make these investments less risky than putting all your eggs in one basket). Since then the yearly limit has been increased to R33 000 and in our latest budget speech (that great one where pilchard eating, dope supporting, legend Minister Mboweni messed with the naysayers) to R36 000.

Sharing our TFSA data, I enlisted the help of a clever mate at EasyEquities who did a few sums for me. We looked only at those users who had deposited the maximum amount over the five years (R30 000 + R30 000 + 3(R33 000) = R159 000). And before you jump to conclusions – most of these users are not wealthy. They sacrifice “luxuries”, they forego treats, they set up debit orders and some invest for their kids, not themselves (more on that later).

Many of the users who invested the R159 000 over five years (on average that would be around R88 a day) had portfolios worth R240 000. That makes the return on their portfolio 14,32% annualized (you see – that’s why you need a clever team mate to help).

Assuming these users continue to contribute the maximum each year, in 2029 they reach their lifetime maximum of R500 000 and their investment could now (assuming same returns to date) be worth R1 702 105,53 – tax free! From then on, there is only growth, no further contributions and just ten years later that investment of R500 000 could be worth R6 491 556,62. Ten more, R24 757 752,39 and ten more R94 422 083,99.

Let me give you a few real examples. One of our users is investing with her kids. She helps them with the monthly deposits, they contribute what they can and together they decide what to invest in (her son is heavily in favour of tech related ETFs and those with international exposure like the Satrix Nasdaq 100). Those kids aren’t even teenagers yet and by the time they are my age (45) they will be multi millionaires many times over. As in many, many times.

Another user is investing with his wife. They “compete” to see who does the best. Obviously the wife! I say obviously because our top TFSA investor on the Easy platform is a woman. And when I look at the top 10, most are women and many are mums.

Puts paid to conventional wisdom I’d say.

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