Johannesburg – The burden of “black tax” causes financial distress to middle- class professionals because they usually have no savings left after having to share their salaries with entire families.
However, there are ways to help your family without going broke.
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, for example, 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 because opportunities for creating financial independence may be limited.
“The tough times we live in make it quite challenging to gain the balance because there has been more of a focus on survival. Magosha says that we need to focus on principles that can help with managing where we are but, also sow seeds for future advancements.
‘‘It will require discipline,” she explains. She 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 needto- haves vs nice-to-haves to set clear expectations around the things you are willing and able to provide for.
- Agree on deadlines and commit to them 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.
- Expect the unexpected When you are financially supporting 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 like 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.
- 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 and not committing to things that require financial support without getting agreement upfront.
- 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 anyone.
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