Starting out in the working world and finally earning a liveable income can be an exciting time in one’s life. At the same time, learning to manage your finances, getting a good start on your savings and making the right financial decisions can be difficult when you’re just starting out.
On top of that, many young people have a responsibility to start giving back to their parents and families who have sacrificed much to give their children a decent education.
As Ernest Zamisa, Financial Adviser at Momentum, explains, if this responsibility is not managed correctly on the part of the young working individual, they could fall into a cycle of financial responsibility that may harm their own financial wellbeing in the years to come.
“A study conducted by Momentum, in partnership with Unisa, has shown that around 71% of South Africans under the age of 39 are financially vulnerable consumers. This market segment faces a number of economic struggles, including high unemployment, the pressure of changes in their life stages (such as student loans, getting married or having children), and starting their savings journey the right way. Adding family responsibility to this list – colloquially known as “Black Tax” – just puts further strain on these individuals if not approached correctly.”
He adds, of course, that this is a delicate discussion linked to complicated emotions. “While many of us are thankful for the opportunities provided to us – and want to repay this in some form – it can also come with a sense of guilt over our success.”
One of the biggest problems, according to Zamisa, is that there is a great deal of anxiety that accompanies the responsibility to support an extended family while at the same time building your career and trying to achieve your financial goals.
“Of course, you can honour this arrangement if you believe it is your responsibility, but it can be overwhelming. Keep in mind that you shouldn’t be putting your current financial commitment to your parents ahead of your financial goals. Rather see it this way – if you prioritise building your wealth now, you can contribute more to your family in the future.”
With this in mind, he lists a few tips for swimming instead of drowning in “black tax”:
1. Be realistic about your money
You cannot take control of your money if you do not understand your financial situation – your income, expenses and commitments.
2. Get help and good advice
If you’re floating financially, get a life jacket. If you’re lost and off track with your money goals, get direction. “We don’t always know how to create and maintain financial boundaries with our loved ones, and this is something a financial adviser can help you to put in place.”
3. Have open conversations with your family about money
You may not need to disclose your payslip, but Zamisa says that sharing your financial goals and a view of your expenses will help them understand what you can afford. “Sometimes our families believe we can afford more than we can. This is why it is important to have open conversations with the people that we trust and for whom we are financially responsible.”
4. Empower yourself and your family
Demonstrate healthy financial behaviour, for example, by drawing up your budget and sticking to it. “Our parents did not have access to the tools and resources we do today, so helping them understand the value of good financial behaviour can benefit everyone.”
5. Enjoy your income
Finally, Zamisa says it is important to enjoy your income. “We work hard so that we can enjoy the rewards. Finding a balance between your financial responsibilities and working toward your own financial goals can give you peace of mind when it comes to your money.”
While many young South Africans cannot avoid paying “black tax”, Zamisa emphasises that there is a better way to approach it. “Learn to manage your finances in a way that helps you support your family without ignoring your own financial needs and working towards your own goals,” he concludes.
PERSONAL FINANCE