‘Black Tax’ is a reality where many South Africans have to juggle limited resources to support themselves as well as their extended families. The challenges brought about by Covid-19 have created added pressure with the support extending to the broader community given the loss of jobs. Kenosi Magosha, Head: Savings Client Solutions at Sanlam explains that while the concept creates a positive initiative to uplift future generations socio-economic status, it can become a vicious cycle if not managed properly.
“The long-term goal of giving money in the form of Black Tax should be to enable your family members to become financially independent e.g. paying for education or vocational training, creating a domino effect for future generations. Notably, when it comes to supporting parents and other extended family members it’s about sustainability as well, as opportunities for creating financial independence may be limited. The tough times we live in makes it quite challenging to gain the balance as there has been more of a focus on survival,” explains Magosha. “This does mean we need to hone in on principles that can help with managing where we are but also sow seeds for future advancements It will require discipline.”
In the context of limited resources, the older generation often focused on ensuring their children received a good education as they believed this would unlock future earning opportunities that would be of wider family benefit. This principle of enabling future opportunities should still hold but there is also a need for the younger generation to focus on efforts to liberate the next generation by making plans to be financially independent when they retire. It is also important not to overlook creating financial resilience provided by insurance as they build wealth. The older generation should also take the opportunity to be part of enabling future generations by having realistic expectations of their children so that the potential of the generations can be unlocked.
Shaking the shackles of Black Tax off requires collective effort and thinking in generations and not just for the now. With the festive season approaching and soon to be followed by back to school we must start adopting principles to balance today, tomorrow and be fair on each other.
Below, Magosha highlights six considerations to help you and your family balance your finances and financial obligations:
Pick your battles
Have honest conversations with your family around need-to-haves vs. nice-to-haves to set clear expectations around the things you are willing and able to provide for. This will allow you to justifiably refuse unexpected and unnecessary things based on the principles you have agreed on.
Agree on deadlines and match the commitment
When finance is required for goals, be upfront about how long you can offer financial support and set deadlines for when you expect to see results, for example a qualification after paying for education. Factor in that life does happen and the key is that there should be evident commitment towards the goal. On the supported family side, it is important to note the sacrifices being made and take hold of the opportunity by committing to make the most of it.
Expect the unexpected
When you are financially supporting your other family members, it is important to put money aside to create financial resilience. Focus on building an emergency fund to safeguard you and your family against unexpected situations such as unemployment.
Give but empower for independence
Giving back is important, but the ultimate goal is to instil financial independence and resilience rather than to create long-term dependence. Help your family members with their finances, direct them to get professional financial advice and share any articles or lessons on budgeting, managing debt and saving to ensure financial sustainability.
Play it fair
For sustainability, and to avoid the situation of the family relying on debt to make ends meet, it is important that family members who are being supported play it fair. This can be done by not having unrealistic expectations, not committing to things which require financial support without getting agreement upfront, and not living beyond means at the expense of the person helping to support the family. Finally, it is also about respecting the plans and priorities of how money will be spent as well as agreeing to wait for things which are not in the plan or list of priorities.
Put yourself first
You cannot help others well if your finances are not receiving proper attention. You risk trapping yourself in a hole which will not benefit you or your family. Ensure you have access to professional financial advice to help you pay yourself first by saving for the future emergencies and retirement as well as avoid unaffordable debt and spending more than you can afford. This will ensure that you retain financial independence, have solid plans to keep you going should unexpected things happen and avoid perpetuating the cycle of dependency.
“The realities of Black Tax have been a challenge particularly now during the tough economic times we find ourselves in. While we work on supporting each other during these tough times, it is important that we establish principles and habits to enable financial resilience and prosperity for you, your family and future generations,” concludes Magosha.
PERSONAL FINANCE