Managing finances is difficult enough, especially with an ever-increasing cost of living paired with our financial responsibilities, but many young South Africans share their income with their extended family as well.
These young people find themselves supporting not only their own children but often also their parents and then sometimes even cousins and aunts and uncles.
This can be extremely tough, especially when trying to save sufficiently for retirement, buying a property or paying off a car installment.
Start the conversation
Jacobs told Parent24 that very often clients ask her if there is any way in which they can make providing for their parents, children, extended family and sometimes people in their employment such as a domestic helper, work for them.
Jacobs says she often suggests that planning and having meaningful conversations upfront helps. But, does that work for everyone?
Is it easy to have such a conversation with your family, are they going to understand where you come from, or is it going to be like one of those conversations that no one want to contribute to?
These two readers shared their insights:
Mathabang, financially supporting 6 people
My name is Mathabang, I am supporting my family and my sister financially. I have five children of my own. I am a single mother, but I am managing when it comes to my children.
I am contributing towards my sister's tertiary education and my children's education. Although three of my children are young and have not started school it is already difficult for me to continue with my sister's education, because her fees are expensive and her school does not allow me to negotiate a smaller amount.
I can only wonder how things will be like when my twins start school next year. Sometimes it's tough especially with the changing economy. Food is expensive.
I am employed on a contract basis, I can not predict how things will be like should I lose my employment because my family depends on it.
It makes me happy to help my family where I can, but I think my sister needs to apply for a loan that she can repay when she finished school so that I can also breathe.
Bongani, financially supporting her mother and siblings
My Name is Bongani, I am supporting my siblings and my mother financially. I do not have children of my own yet.
Last year, I was in Johannesburg working in one of the biggest banks there. They let me go because they said that the company is not doing so well.
Imagine receiving such bad news in the middle of the year, knowing very well that things will not be the same. Because my sister's tuition needs to be paid, my mother's medical bills and groceries need to be paid.
It's hard to talk to my family about such things so sometimes one has to just continue to live and suffer in silence.
Like me, I had to use my savings to pay for the expenses until I got another job in Cape Town. The company is paying very well which means that now I can even support myself and save some money in the process.
Tips and tricks to manage
Jacobs shared some financial hacks she often shares with her clients to get started with turning their financial situation around, below:
1. Get very practical
The most important thing to do is to determine the needs of your dependents and find out how you can finance those needs BUT also consider your own needs.
As advisers, we always caution clients against using their retirement savings to assist parents and children, since it will be almost impossible to make these up, due to the opportunity cost of compound interest and limits to one’s budget for future savings.
2. Involve siblings in your financial planning
If you have siblings, chat to them about how to share the financial responsibility of looking after your parents.
Having frank but loving conversations with parents and siblings can help. As they may lead to making better arrangements, setting out an agreement for repayment, for example, out of their estate, given that funds are available.
It is grim to think about it but try to look at it objectively. Make sure that all family members’ wills are up to date. Jacobs encourages transparency in this regard to avoid surprises down the line.
3. Draw up a family budget
Jacobs believe that drawing up a family budget for each family member through looking at their medical aid or gap cover will help identify a family plan that is cheaper for the family.
Utilise short term car insurance covers for extra protection to avoid unexpected claims which could break your budget, she says. As a financial provider, other people rely on your salary and should you pass away this would put a further strain in your family.
Therefore, get a life cover. You can also get professional assistance to determine a sufficient level of cover.
Make sure that you have stipulated guardians for your children in your will and you have enough life cover to care for your children.
Other crucial ways to protect your loved ones should you be unable to earn an income include having a lump sum disability and income protection cover and making provisions for your children’s school fees.
Set aside funds for school fees and other big obligations as soon as you receive your end -of -year income, or ideally, even earlier. Set aside money for the travel expenses to and from work.
Very often people forget, and sometimes remember when it’s too late and end up frustrated.
Limit debt, especially credit cards and short-term loans. Be aware of the pitfalls of credit cards, including fees and high-interest rates.
Seek assistance with retirement and investment planning. Your current financial situation may last many years, so you need to plan for it. In this case, a professional’s opinion may help.
Try to have a severe illness cover to supplement medical aid. This is a good idea to bolster your finances should a curveball occur.
Jacobs concludes that looking after the financial needs of three generations take serious planning.
She says that when it comes to having the best chance of meeting those financial obligations, one must take multiple considerations and make sure that they meet those financial obligations, but they can still survive financially.
Let us know how you are coping financially during lockdown, share some of your coping mechanisms to help other parents at home.
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