You waited the whole year for your annual bonus - and now that it is in your account, how will you use it?
It is the moment you were waiting for all year. The beep on your phone that signals that your bonus has hit your bank account. Mr Sars already had his share and you can now share the rest with Ms Retail to spoil yourself and your loved ones.
But Salem Nyati, consumer financial education specialist at the Momentum Group Foundation, says it is better not to blow your bonus.
“Before you join the masses partaking in this season’s conspicuous consumerism, pause a minute.
“There are ways you can maximise a cash windfall like a bonus or 13th check that will move you closer to your financial dreams, instead of spending it all in one go on something that will not have any future financial benefit for you.”
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Using the example of you getting a R10 000 bonus, Nyati suggests these five better ways to spend it that will pay off in the long run:
1. Use it to crush high-interest debt
Before you treat yourself, consider that the quickest return you will ever get on money is by paying off expensive debt. Many South Africans are paying interest rates of 19% to 22.5% on their credit cards, which means that every rand you put toward that balance works as a guaranteed, risk-free return.
If you have a R20 000 credit card balance and pay 20% interest on it, using R10 000 of your bonus to reduce it instantly cuts your future interest bill by roughly R3 000 to R3 500 and shortens your repayment period by months.
“A bonus can fast-forward your debt-free journey more than you realise, buying you financial breathing room.”
2. Turn it into future wealth through investing
If you are already on top of your debt, Nyati suggests giving your bonus a job that benefits the future you. A once-off investment – even a small one – can grow significantly thanks to the power of compound interest, which is where your interest earns interest.
“Putting R10 000* into an investment earning a modest 10% return turns into R16 105 in five years, R25 937* in 10 and R41 772* in 15 years. That is the power of compounding: a single lump sum can become part of your deposit for a home, a vacation or your own safety net.”
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3. Build an emergency fund
Nyati points out that most South Africans cannot cover an emergency without borrowing and this is how people fall into debt cycles. Using your bonus to start or boost an emergency fund gives you a buffer.
“If you put R10 000 into a high-interest savings account earning around 5% per year, it grows to R10 500* after a year and R11 576* after three years. But the real value is not the interest but knowing that when a tyre bursts or a geyser leaks, you are not forced into high-interest debt. An emergency fund is financial self-care as it protects your future income.”
4. Invest in your earning power
One of the most overlooked uses of a bonus is using it to boost your ability to earn more, Nyati says.
A R10 000 course or accreditation, whether in project management, digital skills or a trade, can unlock promotions or allow you to earn more through freelance or side-hustle work.
Even a modest salary increase of R1 000 per month becomes R12 000 extra per year, effectively giving you a 120% return on your bonus.
“Just like with money, skills compound. When you invest in yourself, the payoff follows you for life.”
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5. Split it wisely
Not every rand of your bonus has to go into something serious and Nyati is the first to say that guilt-free fun has its place.
“A simple way to balance fun with financial progress is to divide your bonus using a 50/30/20 approach. Put 50% towards something that strengthens your financial position, such as paying off debt or investing.
“Allocate 30% to upcoming essentials like back-to-work expenses or annual costs that always seem to appear at the worst time. Then keep 20% for pure KeDezemba joy: the outfit, the dinner, the weekend away.
“It is a practical way to enjoy the moment without derailing your longer-term goals. You can celebrate today and set up for tomorrow. It does not have to be one or the other.”
*These examples are used for illustrative purposes only. Real returns will vary and depend on things like fees, tax, inflation and your personal circumstances, Nyati notes.
