South African millennials born between 1981 and 1997 have a significantly higher appetite for tax-free savings accounts than the average banking customer, commercial bank FNB said on Friday.

The National Treasury introduced the platform in 2015 as an incentive to encourage household savings, and in 2017 increased the maximum savings limit per year from R30 000 to R33 000, with a lifetime limit of R500 000.

For a consumer base not necessarily known for a culture of saving, the trend in tax-free savings points to an improvement in the financial habits of young South Africans, said Himal Parbhoo, CEO of FNB Cash Investments for Retail.

“Society is accustomed to a belief that young people are perpetual spenders with little to no savings appetite,” Parbhoo said.

“However, our stats suggest that young people are aware of the incremental benefits of being frugal with their money. The advent of digital innovation in the distribution of savings solutions is playing an effective role in providing easier access to millennials and the broader population.”

With tax-free savings accounts, consumer do not have to pay income tax, dividends tax or capital gains tax on the returns.

“With VAT (value-added tax) having gone up earlier this year, consumers should be taking advantage of every opportunity to get some reprieve from the tax burden,” said Parbhoo.

“Young people, in particular, have the benefit of time to build a savings culture to attain financial independence.”

– African News Agency (ANA), Editing by Stella Mapenzauswa