How to ... cope with sending money home

2014-08-19 11:45

This generation of professionals is caught between the needs of supporting family and trying to provide for their own futures. How do I get ahead when I have to help my family stay ahead? Personal finance guru Maya Fisher-French offers some case studies and practical solutions

If you really want to understand the reality of our high unemployment levels, speak to young working black professionals,” says Sinenhlanhla Nzama, a marketing actuary at Old Mutual who supports his extended family and is all too familiar with the expectations of unemployed family members on those who have “made it”.

Breaking the cycle

Sibusiso* (26) is barely on speaking terms with his mother after he reached a point where he had to say “enough is enough” before the demands of his family left him drowning in debt.

“There is this perception that you are living the high life, and that you could always be doing more. The reality is that I am struggling to make ends meet. I am providing as much as I can but I cannot go into debt to support my family,” says Sibusiso.

He currently supports his mother and his sister, who is still in school, as well as several members of his extended family who live with his mother.

Apart from the regular amount he pays to the household, there are always emergencies, usually around healthcare; and as the most financially successful person in his extended family, they look to him for support. “Even my cousin, who traditionally is the head of the family, came to me when he became ill. There is always something.”

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Sinenhlanhla says young black professionals are supporting their families not only financially, but emotionally. “When I visit home, I am surrounded by people who have an expectation that I can do something to help them,” says Sinenhlanhla.

Family members will come to him and ask him where they can find work or how they can start a small business. “As working professionals, we may have more information but we don’t have enough to really help,” says Sinenhlanhla, who finds that he plays the role of both mentor and father figure.

“You have to provide emotional strength, especially if there is no other father figure in the family.”

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Afika (27) is trying to break the financial cycle of dependency. His mother is about to retire and after spending her working years supporting her children,

she has put little away for her own financial needs.

“I couldn’t bear that she had to rent a backroom somewhere after all she had done for her family and her kids, so I bought a house for her,” says Afika.

But this has left Afika stretched financially – he has his own dreams and doesn’t want to be in a situation where he reaches retirement without his own home or a retirement fund.

“I want to break this cycle of the young black middle class taking care of the whole family, but I don’t know how to talk to my mother about her retirement and whether she can help to pay the bond. She is old school and does not talk about her finances or her plans when she retires,” he says.

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This generation of professionals is caught between the immediate needs of supporting family, but also trying

to break the cycle of dependency by providing for their own futures – by not taking on excessive debt and putting something aside for their own children and their retirement.

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The Old Mutual Savings & Investment Monitor found that 50% of the youth surveyed were struggling to make ends meet. Santie Schindehutte, a case mediation manager at the National Debt Mediation Association, says the organisation has found many working professionals in a similar situation – they are expected to step in to support immediate and extended families because they have a stable income.

“This places not only a financial but emotional responsibility on the shoulders of the income earner to provide finances even if they cannot afford to. In a lot of instances, they do not want to let their family down and there is really no other income source to assist the family,” says Schindehutte.

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Kerry King, an advisory partner at Citadel Wealth Management, has many clients who are supporting extended families. King explains that this has created a culture of community saving rather than the idea of saving for yourself for the future.

“There was always the idea that someone else would help you out. Unfortunately, there is simply not enough support in the communities. The unemployment rate is so high that many feel they are the only ones supporting many, many families.”

The burden of success

Sibusiso, Afika and Sinenhlanhla are seen by their families as having “made it”.

“I am by far the most successful both academically and financially in my entire extended family,” says Sibusiso, although his dream was nearly destroyed when his father left home just as he started university.

“He left and never provided any financial support; our family was left in poverty. I grew up in a well-off middle class family, but my sister – who was eight at the time – has grown up poor.” He relied on bursaries and part-time jobs to complete his law degree.

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Of the six cousins who grew up together in Mthatha with his grandmother, Afika is the only one who achieved his dreams. “We grew up the same way, we were a typical middle class black family, we weren’t poor, but we knew we wanted more.

“I told myself I would one day be something that would make me happy and other people happy. Other people didn’t reach their dreams, but they can’t say they didn’t have the same opportunities, they just didn’t take them,” says Afika, whose engineering qualification was funded through the National Student Financial Aid Scheme.

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As the “lucky” ones, is there an obligation to pay forward and assist the rest of the family?

Sinenhlanhla says the need to help one’s family is not only an obligation but a realisation that if you are able to assist a family member obtain an education, they too can join the ranks of the employed and help one to carry the financial burden.

Sinenhlanhla’s older brother, for example, supported him through his studies and once he was qualified and working, they were able to support their mother by buying her a home together. “On his own, there was no way my brother could have afforded it,” says Sinenhlanhla.

Now the brothers are able to help their mother and extended family – the burden, although still large, is at least shared. Sinenhlanhla’s sister is finishing her studies and will hopefully be financially independent soon.

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“When I go home, I can see the need, I can see there is no food in the fridge – how can I leave my family to eat cabbage every night?” asks Sibusiso, who adds that it is not just a matter of people sitting back asking for handouts, many of them are working but earning too little to support their children.

“My aunt is a factory worker trying to put three children through school. My niece is in matric and the school fee subsidy has fallen away.

“Her mother cannot afford the fees and to put food on the table. She is a bright girl and could go through to university, how can I not help?”

Keeping the golden goose alive

While there is clearly a desire by many young professionals to help their families, it does not help if the goose that is laying the golden egg starves to death.

King says the key goal for her clients is not to depend on their children in retirement and therefore to break the cycle of dependency.

When working with clients, King says the most important thing is to put boundaries in place. “We ring-fence money for retirement and we ring-fence money for family spend. This has also enabled them to be empowered to express how much they are able to contribute to the family. It was hard previously to stick to with no physical boundary,” says King.

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Financial adviser Craig Gradidge of Gradidge-Mahura Investments says getting financial advice and putting a plan in place is critical.

“An adviser will assist you in articulating your own goals and how you can achieve them, as well as create a plan around how to still support your family.” He adds that an adviser can also be a useful independent person who can meet with the family members to explain the situation.

In Afika’s case, Gradidge recommended that Afika and his mother go and see an adviser who could help her understand her financial situation in retirement and what support she may still need from her son.

Gradidge says he needs to approach it as a discussion about his ability to carry the cost of the house on his own. He could then share his goals such as one day owning his own home and how that would fit into the entire financial plan.

“He should prepare himself for a difficult conversation, because avoiding the discussion is likely to mean him continuing to carry the financial commitments of the house on his own,” says Gradidge.

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Sibusiso says: “I am under constant pressure to maintain my mother’s lifestyle. She is a very proud woman, and there has been a great deal of conflict around that. The financial demands are also increasing for my sister as her school fee subsidy is reducing as she goes into higher grades. I had to sit down with my payslip and my budget and say ‘this is the sum total of what I have – how do we divide the needs?’”

Sibusiso is also trying to save up to buy a car he needs for work. “My job requires a lot of meetings and travelling and not having a car is costing me a great deal in transport costs.

“I want to build up enough of a deposit so that I don’t have high repayments each month.”

His challenge is to get his family to see that buying a car is a more important goal right now as it will help him to earn the income that is keeping the family afloat.

Like with the other case studies, these are necessary conversations to have so that everyone can understand what they can or cannot expect from each other.

The solution

1. The financial plan

It starts all with having your own financial plan. This needs to include your personal goals like retirement, saving for a car or a deposit on a home. You then need to create a budget for monthly expenses, and one of these monthly expenses is family.

Citadel’s King says: “I make my clients write down a budget, they have to itemise every cent they spend, including what they give to family and even a car guard, so that they understand how much they can afford to give to others.”

According to King, it’s important for people to understand that family support comes from their monthly expenses budget and not from their retirement savings – these must be kept separate.

Gradidge says one of the realities is that young professionals supporting their families need to reassess their financial goals. “My role has changed from building personal wealth to ensuring a dignified retirement for the previous generation, and setting up the next generation to be the real wealth creators of the family.”

He explains that this means having enough retirement funds so that you are not a financial strain on your children when you retire. You may also have to have a higher level of risk cover as you have many financial dependants.

2. The emergency fund

You need to create a savings fund for family emergencies. This fund is over and above your monthly financial commitment towards the family and is for those unexpected expenses. Sibusiso says this is a goal he is working towards and he is also setting rules around what constitutes an emergency.

For example, for a tooth extraction, his family can use the public sector because it is not an urgent procedure, but if someone becomes seriously ill and requires private healthcare, the emergency funds can cover that.

3. The education fund

Sinenhlanhla created an education fund for his family because he become frustrated about being treated like an ATM. “I am now saving for them in advance. It feels much better to do it this way than just to give it out.”

Sinenhlanhla and his peers have been helping pupils within his church through the creation of an educationfund. “Instead of assisting these pupils as we go and dipping into our emergency funds whenever there is some registration fee needed, we decided to prefund these.”

He explains that the education fund is a simple saving scheme and the proceeds benefit the youth who want an education.

Since the fund started in February 2012, they have assisted five pupils in getting tertiary education and provided support of R24?700 in university registration fees for five pupils.

“This year, we also managed to assist 14 primary and high school pupils in KwaZulu-Natal with school uniforms,” says Sinenhlanhla, who adds that the fund is not without challenges.

“At times, the demand is just overwhelming. We are appreciative of the fact that we would have had to pay these out of our pocket, or else not be able to assist.”

He says the biggest lesson learnt is that sometimes assistance with registration fees is not sufficient. “Some of the pupils we assist end up not getting National Student Financial Aid Scheme funding, and they also need support with transport and other items such as textbooks.

“We have been working with pupils who were previously unemployed and whose parents are also unemployed. Assistance with registration fees alone is hardly sufficient.

“We are looking to make a bigger impact to these pupils from next year, even if it means we support two pupils in full.”

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