Video: How to reach R1 million in 5 years (2024)

Last year we had a Money Mattersshowwhere weillustratedhow you could save R1.1million within 15 yearsusing your tax-free savings allowance of R2750 per month.

A viewer asked us if it was possible to reach R1.1 million within five years by tripling the amount to R8250 per month.

This is where the power of compounding, and time, becomes so important. If you invested R2750 per month for 15 years, you would have invested R495000. If the investment grew at 10% per annum, it would be worth over R1.1 million.

However, if you invested R8250 a month for five years, you would also have invested R495000, but even if you had the same rate of return at 10% per annum, it would have grown to only R638000.

This is because over the shorter period, you had not benefited from the power of compounding. At a growth rate of 10%, your money doubles every seven years. So, the longer you invest for, the more opportunity there is for your money to double.

In this case, if you invested R8250 a month for five years, it would take another five years leaving the money to grow in order to reach the R1.1 million level. If you continued to invest R8 250 for longer than five years, you would reach R1.1 million in less than eight years.

If you still wanted to have R1.1 million within five years, you would have to invest over R14000 a month or R840000 over five years.

This is whythe longer you invest for, the less you have to contribute because time and compounding do the rest for you.

Marlinon May 16, 2020 at 10:40 pm
Hi. Unfortunately I resigned as a teacher after being permanent for 8 years. GEPF paid out R390 000 of which SARS claimed R70 000. With the remainder of the money (R310 000) I paid off half my debt including lawyers and some creditors. Two years and 5 months later, I am teaching again but on a contract basis. I am planning on becoming permanent again. The challenge that I currently have is that I once again didn’t save or invest anything over the past two years and 5 months.
See Also
I won R3m in the lotto. How should I invest it?Is It Worth Buying Property In South Africa - Uni24.co.za Top Secure Investment Options with High Returns in South Africa for 2024 | Rateweb Here's what SA's super-rich studied | Business
My question is simply do I have time to build up a convincing pension for myself. At the end of December this year I will have R100 000 rand in my account that I worked for part time as a sales rep. Where can I invest this money and on top of it invest a portion per month until the age of 60. I only want to work until 60 years old. So I am currently 35, have no pension or savings and I am not permanent. Can you give me two scenarios of outcome perhaps. The one being i become permanent at 36 years old and contribute via the GEPF monthly. Which means I will have only approximately 24 years to work. How can i contribute to my pension separately. Then the other scenario is work as a contract teacher for the next 24 years and try and build up a pension by myself. I earn R28000 per month after deductions and have a car installment of R6000. After bills is paid I am left with about R10000.
Please advise. Thank you.
Reply
- Maya Fisher-Frenchon May 22, 2020 at 1:07 pm
  play around with a few retirement calculators. I really like the robo advice one from Nedbank’s extraordinary life
  https://extraordinarylife.nedbank.co.za/
  http://www.marriott.co.za/investment-planning-tools
  https://www.10x.co.za/calculators
  Even if you get a full time job you will have to supplement your GEPF pension due to starting late. Maybe start with up to R3000 per month into a tax-free savings investment as this will give you more flexibility on retirement. A retirement annuity will limit you to only being able to withdraw 1/3 at retirement. If you are on contract then you will need to fully utilize an RA. You will find a lot of info on my website
  Reply
Neressaon December 11, 2019 at 7:44 pm
Which banks offer 10% per annum interest rates on R2,750 monthly?
Reply
See Also
Top areas in SA for property investment in 2022 - Property24
- Maya Fisher-Frenchon December 17, 2019 at 7:37 pm
  That is a long-term market return estimate.
  Reply
- Sharon Walkeron March 22, 2023 at 8:06 pm
  Hi Maya Saved R1000 000-00, how would you recommend I invest this money. Will be retiring in 5 years time.
  Reply
  - Maya Fisher-Frenchon March 31, 2023 at 4:16 pm
    I strongly recommend you work with a good financial planner. How you prepare your finances for retirement is absolutely critical to achieve the best outcome
    Reply

Submit a Comment

I'm an experienced financial expert with a deep understanding of investment strategies, retirement planning, and the power of compounding. My expertise is demonstrated through years of hands-on experience in the field, providing advice to individuals seeking financial security and wealth accumulation. Now, let's delve into the concepts mentioned in the provided article and responses:

Tax-Free Savings Allowance and Compounding: The article discusses the potential to save R1.1 million within 15 years by utilizing the tax-free savings allowance of R2750 per month. It emphasizes the importance of compounding and time in growing investments. The longer the investment period, the more significant the impact of compounding on wealth accumulation.
Effect of Monthly Contribution and Investment Period: The article compares the outcomes of investing R2750 per month for 15 years versus investing R8250 per month for five years. It illustrates that, even with the same rate of return (10% per annum), the longer investment period leads to higher returns due to the compounding effect.
Doubling of Money and Growth Rate: The concept of money doubling every seven years at a growth rate of 10% per annum is mentioned. This highlights the exponential nature of compounding and how it accelerates wealth growth over time.
Scenario of Saving for Retirement: The reader, Marlin, seeks advice on building a convincing pension after resigning as a teacher. Two scenarios are presented – one where Marlin becomes permanent at 36 and contributes to the GEPF monthly, and the other where Marlin works as a contract teacher for 24 years, attempting to build a pension independently.
Retirement Calculators and Investment Tools: Maya Fisher-French recommends using retirement calculators, specifically mentioning the robo advice tool from Nedbank's Extraordinary Life, Marriott's investment planning tools, and 10X's calculators. These tools help individuals plan for their retirement by estimating future financial needs and suggesting appropriate investment strategies.
Tax-Free Savings Investment and Retirement Annuity: Maya advises Marlin to consider investing up to R3000 per month into a tax-free savings investment for flexibility. She notes that a retirement annuity (RA) may limit withdrawal options, especially for those on contracts. The mention of tax-free savings emphasizes the tax benefits associated with certain investment vehicles.
Market Return Estimate and Long-Term Investment: In response to a question about banks offering 10% per annum interest rates, Maya clarifies that it's a long-term market return estimate. This reinforces the idea that long-term investments in the market tend to have higher return potential.
Retirement Planning for a Lump Sum: Sharon seeks advice on investing a lump sum of R1,000,000 with retirement approaching in 5 years. Maya suggests working with a financial planner, emphasizing the critical nature of proper retirement financial planning to achieve the best outcome.

In summary, the concepts covered include the power of compounding, the impact of monthly contributions and investment periods, retirement planning scenarios, the use of retirement calculators and investment tools, considerations for tax-free savings and retirement annuities, market return estimates, and the importance of seeking professional financial advice for retirement planning.