Question:
I have a lump sum of R300,000 for four years of varsity studies for my child. Where is the best place to invest it while it lies dormant waiting to be used?
— A Fat Wallet Facebook community member
Answer:
Four years is relatively short, but you don’t state when your child will be entering university. If it’s within the next year then the stock market may seem attractive, but it does come with risk of a correction or crash.
So I would suggest an interest-bearing investment that may offer lower returns but will ensure your capital is safe. Rates have been coming down in recent months but there are still some decent returns being offered in cash or money market funds.
One point is that any interest earned will be taxed as income in your name. If you’re under 65 then the first R23,800 is exempt and over 65 it’s R34,500. So assuming you have no other interest income, the amount of tax payable will be small, as you’ll likely earn only slightly more than the South African Revenue Service interest exemption.
— Simon Brown, Just One Lap
We’d like to hear from you. E-mail us on yourmoney@fm.co.za
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.