There is one investment that every South African should aim to have. It’s called a TFSA, which stands for tax-free savings account.

TFSAs were introduced in 2015 to encourage South Africans to save, by providing an opportunity to invest tax-free.

That makes them an excellent vehicle for growing long-term wealth. And you can start investing with as little as R50.

The rules are simple. You can invest up to R36 000 per year into your TFSA, with a lifetime limit of R500 000.

While the money you are using to invest has already been taxed, all growth in the investment, including interest, dividends and capital gains, is exempt from tax.

And since your withdrawals from your TFSA are not taxed, it’s an excellent product to supplement your retirement funds.

Let’s use an example of a 30-year-old who contributes R3 000 per month to a TFSA. This is invested in a unit trust fund that targets a return of 5% above inflation.

By the age of 45, they would have contributed the lifetime limit, an amount of R500 000. But instead of drawing it and using it, they leave it to continue to grow.

By the age of 70, the investment would be worth about R2.5 million, which they can then use tax-free to supplement their retirement income.

You can leave your child a significant financial legacy by opening a tax-free savings account for them and allowing time to work its magic to grow the money.

You can open an account in your child’s name as soon the day they are born, as long as they have a South African ID number. If you contributed the full R3 000 per month for 15 years, your child would have R800 000 by the age of 15.

If the lifetime limit is not lifted, you would stop contributing and leave those funds to grow. By the time your child is 55 years old, the investment would be worth nearly R4-million, assuming the funds grew at 10% per annum.

While investing R3 000 a month for your child may be a financial stretch for most families, you can start with R500 a month and increase the contribution by 10% each year.

By the time your child is 15 years old, the fund would be worth R260 000. If you left that to grow, by the time your child would have R1.2-million in today’s value, when they reach the age of 55.

That is a powerful way to use R500 a month to leave your child a legacy.

It's important to remember that your TFSA should not be used for emergencies. If you do this, you would be wasting the incredible compounding power of the TFSA.

The best way to use a TFSA is to add funds and let them grow over the long term. If you withdraw from your TFSA, you cannot “top up” again, as the original contribution is counted towards your lifetime contribution.

Let’s say you contributed R72 000 over a period of two years, and you withdraw R20 000 for an emergency. It would still be deemed that you contributed an amount of R72 000.

If you decide to put the R20 000 back in that same tax year, it would be considered an over-contribution and could be taxed at the 40% rate.

So, it’s best to leave your contributions untouched to take full advantage of your TFSA.

While most banks offer a TFSA as a savings account, this is not necessarily the best place for your longer-term savings.

You can already earn up to R23 800 in interest each year before you pay tax (R34 500 if you are 65 or older), so you are not really saving tax by using a TFSA for a short-term savings account.

You need to be investing for long-term growth through unit trusts or exchange-traded funds that invest in the stock market both locally and abroad. With these funds, the income you earn comes from dividends as well as capital gains. Outside of a TFSA, this income is taxed.

All unit trust companies and platforms that offer exchange-traded funds will have a range of tax-free savings accounts.

If you are considering a TFSA offered by an insurance company, check the fees. Some of these products carry high fees if you are not invested for a certain period of time.

But don't worry too much about what the best fund would be. Rather focus on starting the investment. The sooner you start, the more time you have for your investment to grow!