When it comes to building wealth, the biggest mistake isn’t choosing the wrong fund or timing the market badly. The biggest mistake is waiting. Time, not timing, is the ultimate multiplier of money.
The Power of Compounding
Compounding is often described as “interest on interest,” but that hardly does justice to its transformative power. Each contribution doesn’t just grow - it grows on top of last year’s growth, creating an exponential curve over time.
Take the numbers we modelled:
A 20-year-old contributing up to the maximum Tax-Free limit of R500,000 ends with over R5.2 million at 65.
Start the same process at 40, and the end value shrinks to R1.7 million.
At 50, it barely crosses R1 million.
Nothing else changed, only the start date. This is compounding’s silent rule: the earlier you begin, the more time does the heavy lifting for you.
What About Kids?
When we modelled children starting as early as age 10 with just R200 per month, the results were remarkable. Even without annual increases, the eventual values reached into the millions. With a simple 6% annual escalation in contributions, the growth curve steepened dramatically — all without ever breaching the R500,000 lifetime cap.
Imagine giving a teenager the gift of an investment that will silently work for them until retirement. It’s not pocket money; it’s a launchpad.
The Tax Advantage
Now add the effect of tax-free status.
If these same investments were made in a taxed product at a modest 18% tax rate, every bit of growth would be clipped year after year. Over decades, this “silent tax drag” erodes millions of rands in potential wealth.
For example, on a R5 million balance at retirement, 18% tax on growth could mean well over R1 million lost to the taxman. With a Tax-Free Investment (TFI), every cent stays in your pocket.
Behavioural Truth: Future You vs Present You
Here’s the paradox:
Present You sees R200 or R1,000 a month as small, almost forgettable.
Future You sees those small amounts snowball into millions — tax free.
The behavioural hurdle is our tendency to undervalue small beginnings. We think “it won’t matter,” but the data shows the opposite. Every year delayed is a compounding opportunity lost forever.
The Real Cost of Waiting (With 18% Tax on Growth)
To bring it home, let’s compare three investors, each contributing the full R500,000 cap at different ages:
|
Start Age |
Tax-Free Value at 65 |
Taxed Value (18% on growth) |
Cost of Waiting (Lost to Tax + Time) |
|
20 |
R5.23 million |
~R4.29 million |
R940,000 lost |
|
40 |
R1.78 million |
~R1.55 million |
R230,000 lost |
|
50 |
R1.00 million |
~R900,000 |
R100,000 lost |
Notice two things:
Starting later already costs millions in missed compounding, even before tax.
Tax then quietly shaves off hundreds of thousands more, even at a modest 18%.
The Call to Action
Whether you are a parent, a young professional, or someone in their 30s or 40s, the principle is the same:
Start now.
Stay consistent.
Respect the cap.
Let time and compounding do the rest.
The silent millionaire maker isn’t luck, markets, or timing. It’s starting early, sheltering growth from tax, and letting the years do their work.