The tax-free savings account (TFSA) is one of the most powerful wealth-building tools available to South Africans, yet it remains one of the least understood. Too many treat it as a glorified savings jar instead of the investment engine it was designed to be.

At its core, the TFSA shelters growth, dividends, and withdrawals from tax. Used properly, that means compounding is untaxed for decades. A simple ETF inside a TFSA can grow into a life-changing nest egg, far outstripping the return on cash parked in a bank.

The numbers tell the story. By contributing the annual maximum and investing in a broad equity ETF, an individual can accumulate millions over their working life, without the South African Revenue Service (SARS) taking a cent of the growth. Yet surveys show most South Africans still keep their TFSA money in cash, effectively squandering the opportunity.

What makes this worse is that the state itself set up the TFSA to encourage savings, yet banks and advisers quietly profit when clients remain in expensive or low-yield products. Education is lacking, but the mechanics are simple enough for anyone to use.

In a country where inflation steadily eats at savings, the TFSA should not be optional. It is the smartest tax break available, and South Africans ignoring it are leaving money on the table.