Thank you for reading Keep The Faith! If you enjoy our content, tell us by leaving a review here
Wealth creation is elusive when one earner supports many – this is the dilemma faced by many young black South Africans when it comes to “black tax”, referring to their financial support of their extended families in black communities.
“While the efforts made through black tax benefit individuals and communities, these very same efforts can, inadvertently, create a cycle of financial adversity,” said John Manyike, the head of financial education at Old Mutual.
“The issue of black tax is a complex one, characterised by a balancing act between the responsibility felt to immediate and extended families, and the desire to attain financial freedom.”
The burden of supporting extended family can cripple an individual’s financial aspirations.
Young professionals who come from disadvantaged backgrounds often remain in the same financial position for an extended period.
This is compounded by the fact that South Africa’s economy is severely strained.
According to research conducted through the Old Mutual Savings & Investment Monitor, black tax is one of the biggest causes of financial distress among South Africa’s middle-class.
Last year’s research included the following findings:
* About 72% of working metro South Africans are supporting, or foresee that they will have to support, older family members in the future (70% in 2017).
* The equivalent numbers for black respondents was even higher: 83% foresee that they will have to support older family members in the future (79% in 2017).
* For black respondents, support for parents was the most prevalent, followed by siblings. This is apart from respondents supporting their own children.
* Nearly one in five black working metro South Africans regularly supports at least one sibling.
So what can we do to ease the black tax burden for affected individuals?
Manyike provides a simple answer: proper financial planning. “In instances where an individual is regularly contributing towards family needs, it must be factored into the person’s financial plan.
“This is where sound planning becomes critical. With a good financial plan, the person would still be able to attain their lifetime financial goals.”
Manyike said that knowing their limits through proper financial planning and monthly budgeting would help young salary earners in managing black tax.
It becomes an issue when individuals don’t have the proper financial literacy and acumen to differentiate between what they can and can’t afford.
“You need to understand and maintain your financial health and limits before you can offer a helping hand.”
Main image copyright: Karen Sandison/ANA
First published 19.06.19: https://www.iol.co.za/personal-finance/tax/black-tax-is-holding-back-young-professionals-26686891
Before you go, we’ve noticed you’ve visited Keep The Faith a few times; we think that’s great! It’s regular support from readers, like you, that makes our work worthwhile. So, here’s a heartfelt thank you from our team.
Did you know, you can also support Keep The Faith with a gift of any size today?
Your gifts are so important to our future because we provide all our services for free and help those who are in need of God's Word. 100% of your gifts will be used to help us continue transforming lives and supporting UK and international Christian projects.