There is a deceptively simple question at the heart of personal finance: should you spend it now, or should you grow it for later?
Immediate needs compete with long-term goals. Rising costs put pressure on households, while the future continues to demand attention in the form of retirement, education and financial security. For financial advisers, this tension is not abstract – it plays out daily in conversations with clients trying to make ends meet while still planning ahead.
Recent regulatory developments – particularly the introduction of the two-pot retirement system and changes to tax-free savings accounts (TFSAs) – have brought this tension into sharper focus. These tools offer flexibility and opportunity, but they also expose behavioural challenges at the core of financial decision-making.
Insights from Butši Tladi, FIA director, and Theoniel McDonald, chair of the FIA financial planning exco, offer a perspective on what is unfolding and what it means for advisers and clients alike.
A system shaped by reality
The two-pot system did not emerge in a vacuum. Its origins lie in significant financial stress – particularly during the COVID-19 pandemic.
“It raised the question of whether people should continue saving for a future that may feel uncertain, when there are very real financial pressures in the present,” says Tladi. “This is not a new thing. We’ve always grappled with how one balances these two.”
The system attempts to accommodate both needs by allowing partial access to retirement savings while preserving the majority for the long term.
A better system, with complications
From a design perspective, the two-pot system represents progress.
“In the fullness of time, two-pot is a much better system than the one we had previously,” says Tladi. “Before, it was common for individuals to resign from their jobs simply to access their retirement savings, cashing out their funds and often starting from scratch with each job change.”
Now, a significant portion is protected.
“There’s two-thirds of our savings that will continue to be invested until we reach retirement. That’s where the magic lies.”
However, early usage patterns reveal a more complex picture. Around four million withdrawals have been made since implementation, totalling approximately R57 billion.
“This is people using the future’s money now,” says McDonald. “It is really a double-edged sword.”
While the system prevents the complete erosion of retirement savings, it creates a new behavioural risk.
“When that becomes your slush fund, it becomes very dangerous.”
A consistent theme is that the issue is not the product itself, but how it is used.
“The problem is really around financial management,” says McDonald. “We tend to focus so much on the product… but the reality is that we are withdrawing these assets because of poor financial management.”
The prevalence of repeat withdrawals reinforces this – as does the broader economic context:
“Seventy-five percent of South Africans borrowed money last year for essential living costs. In that environment, access to any savings is difficult to resist.
“The two-pot system is not creating the problem; it is making it visible.”
The advice gap
If behaviour is central to the issue, advice becomes critical. Yet access to advice is uneven.
“I’m of a strong opinion that often those that are withdrawing don’t have access to advice, or access to good advice,” says McDonald. “For the FIA, closing this gap is a key priority.”
“We always see advice as the superpower that truly differentiates people that have got better outcomes,” says Tladi. “Advisers are not just product specialists – they are interpreters of behaviour, context and risk. It starts with understanding our society, our culture, and the people that are ultimately our clients.”
At the core of effective financial planning is sound financial management – one of the six financial planning components and, according to McDonald, among the most critical and most overlooked. Budgeting, managing cash flow and building an emergency fund are foundational.
“If you keep your financial management right, everything else will work out,” he says. “This reduces the need to access long-term savings prematurely.
“The idea with two-pot is to have access in a real extreme emergency. But if you’ve got proper financial management in place, you are significantly less likely to withdraw.”
It also means using products for their intended purpose.
“A retirement product is meant for retirement, not for today’s consumption,” says Tladi.
The same applies to TFSAs, which are often misunderstood as accessible savings vehicles.
“When you talk about tax-free savings, that in itself is an investment – not something you should be accessing as and when you see fit.”
The TFSA opportunity
While the two-pot system has dominated recent discussions, TFSAs remain a powerful and often underutilised tool. The annual contribution cap has been raised from R36 000 to R46 000 per year, and thanks to the absence of tax on growth, the long-term compounding benefits are significant.
“If you consider the compounding effect in a product like this, it becomes massive,” says McDonald. “It could be so big that it could be a full retirement plan for someone, if they start early enough.”
Tladi illustrates this with a striking example: investing R3 000 a year for the first 10 to 11 years of a child’s life – and leaving it invested until the child turns 60 – could produce a fund worth roughly R38 million in today’s terms.
“That recipient will ultimately have financial freedom in retirement just by virtue of having somebody investing for 11 years for them.”
TFSAs also create an opportunity to build financial awareness from an early age, but access at 18 introduces a behavioural risk – withdrawing too early eliminates the compounding advantage.
“Can you imagine a generation of South Africans that at the age of 18 already understand the power of compounding?” asks Tladi. “That would be powerful. Making that vision real requires education, not just investment.”
Starting matters
One of the most important messages in financial planning is also the simplest: start.
“It’s never too late to start saving,” says Tladi. “Many delay because they feel they cannot do enough. But it’s never too late.”
McDonald encourages a practical first step: writing down your expenses: “You start to take accountability. Even when there is little left over, awareness creates momentum. From there, priorities become clearer – reduce debt, build an emergency fund, and gradually move into long-term investing.”
The tension between spending and growing is unlikely to disappear. It reflects a fundamental aspect of human behaviour. What has changed is the framework within which these decisions are made. The two-pot system introduces flexibility with safeguards. TFSAs offer powerful long-term growth in a tax-efficient structure.
But tools alone are not enough. Behaviour, education and access to advice remain the determining factors. For advisers, the opportunity lies in helping clients navigate this complexity with clarity and discipline – guiding them towards a more sustainable balance between today’s needs and tomorrow’s goals.