Firstly there is the matter of what instruments your money will be invested in. Endowments, unit trusts and LISPs can invest in anything from pure interest bearing instruments to equities. It all depends on the fund you go into. With savings accounts, fixed deposits and money market accounts (available from all four major banks) growth is limited to interest earned, which varies according to prevailing interest rates.

Secondly, from a liquidity point of view, restrictions will only apply to an endowment policy and perhaps on certain fixed deposits (e.g. a 36-month fixed deposit). The Long Term Insurance Act specifies that a policyholder in an endowment may only have two access points to the money in the first five years, namely one loan and one surrender.

Lastly, when considering tax, personal circumstances are critical for selecting the correct vehicle. Endowments are taxed according to the four fund approach where all tax is paid by the fund during the policy term. So an endowment therefore pays out net of tax ? not 'free' of tax.

The fund is taxed at a flat rate of 30 percent of all net rental income and interest and 7.5 percent on capital gains. All the other vehicles mentioned are taxed in your hands at your personal marginal tax rate. Certain income tax exemptions are applicable (interest exemption of R19 000 for those under 65 years of age or R27 500 for those over 65 years and R16 000 Capital Gains Tax exemption per annum).

So although the principles may be easy to understand, choosing the correct investment vehicle could become trickier and therefore may require the services of a Certified Financial Planner.

Best of luck.

acsis Limited is an authorised financial services provider. The response to the question covers some of the issues in a general and factual manner and does not constitute advice. It is important to consult with a financial planner who, after an analysis of the individuals? personal needs, goals and circumstances, will be able to provide comprehensive and appropriate advice.