Your December bonus: debt, emergency fund, tax-free savings or the bond?
Clearing R10 000 of 22% debt saves R2 200 in a year with no risk - more than the same R10 000 earns at an assumed 7% in savings, which is why debt comes first.
In 30 seconds
- R10 000 paid off a 22% debt saves R2 200 a year - a sure return no savings account is likely to match.
- A R40 000 bonus is about R27 600 after tax at a 31% top rate, so split the R27 600, not the R40 000.
- You can put R46 000 a year into tax-free savings (R500 000 for life) - but only after high-interest debt and a first emergency buffer.
Start with what the bonus really is
Before you decide where it goes, work out what actually arrives. Our bonus-after-tax post showed that a R40 000 bonus on a R40 000 monthly salary leaves about R27 600 in 2026/27, because all of it is taxed at the 31% top rate. We use that figure below.
The order that usually wins: the rate you pay beats the rate you earn
Every rand has one best job, and it is usually the one with the highest guaranteed return. Paying off debt is a guaranteed return equal to the interest rate on that debt, with no tax to pay on it. Saving is a return that depends on the rate on offer, and interest is taxable above the annual exemption.
The rates below are assumptions to show the method, not quotes. Replace them with the rates on your own statements.
- Card or store debt at 22%: R10 000 repaid saves R10 000 x 22% = R2 200 a year.
- A bond at 10.5%: R10 000 extra saves about R10 000 x 10.5% = R1 050 a year in interest.
- A savings account at 7%: R10 000 earns about R700 a year, before any tax.
So the debt with the highest rate comes first. A card at 22% beats the bond, which beats a savings account, on rate alone.
But keep a first buffer
Paying all of it into debt and having nothing set aside leaves you borrowing again at the same 22% when the car needs a repair in January. Most plans keep a small buffer first, then go back to the debt. Our emergency fund post covers how many months to hold.
Where tax-free savings fits
From 1 March 2026 you can put R46 000 a year into a tax-free savings account, up to a R500 000 lifetime limit. Growth inside it is free of tax on interest, dividends and capital gains. Money you put in counts against the limits even if you withdraw it, so it is a long-term home, not a parking spot (SARS - Tax-free investments).
The tax-free advantage is real, but it is not a guaranteed 22%. It earns what the underlying investment earns, so it usually comes after expensive debt is cleared.
A worked split of R27 600
- R10 000 to the 22% debt: saves R2 200 a year.
- R7 600 to a starter emergency fund: a buffer so the debt does not come back.
- R5 000 to the bond: saves about R525 a year at the assumed 10.5%.
- R5 000 to tax-free savings: well inside the R46 000 yearly limit, growing without tax.
The split is an illustration. If you have no card debt, the debt line moves down and the buffer and tax-free savings take its place. Education, not advice: your own rates and goals decide the order.
The 22%, 10.5% and 7% rates are assumptions chosen to show the arithmetic, not current market rates. We have not confirmed today's rates; use those on your own accounts.
How MaxWealth helps
The debt payoff tool takes your own balances and interest rates and shows how long each debt takes to clear and what an extra payment saves, so you can test a bonus-sized payment before you decide. The emergency fund tool does the same for the buffer.
Sources
- Tax-free savings limits (R46 000 a year from 1 March 2026, R500 000 lifetime): SARS - Tax-free investments.
- R27 600 net bonus: from our bonus-after-tax post, based on the SARS 2026/27 rates of tax.
- Interest savings and the split: our own arithmetic on assumed rates, before tax on savings interest.
Education, not financial advice. This post explains how the rules and the arithmetic work. It does not recommend any financial product, and your own situation may differ - speak to a registered financial adviser or tax practitioner before you act. Figures were checked against the linked sources on the date above.