How to manage black tax and save smartly before the holidays hit

Image: Getty
Image: Getty

Black tax can put pressure on young professionals to provide not only for their immediate families, but their extended families as well. While it’s a wonderful time of togetherness, this means funds can run quite thin.

Black tax is familiar to many South Africans. In fact, a 2017 survey showed that of the respondents who earned under R6000 p/m, 26% were expected to support their parents and children.

Actress Nomzamo Mbatha says that black tax has had a relative impact on her personally. She starts prepping for the holidays well in advance, “In the past, I’d end up buying all kinds of things for my 13 nieces and nephews, along with toys, school uniforms and stationery – at times, to ease the load on my siblings, I’d even pay school fees. But I’ve learned from experience that if my well runs dry, I can’t care for myself, let alone anyone else. So I’ve cut my spending and I’ve started holding my family accountable.”

She says she now manages her extended family’s expectations by saying no, “Foremost I think it is such a great privilege to be in a position to be able to help others, especially my family. But I’ve had to learn that at times its best to say no – which in most black families we’re taught not to say. There’s a difference between needs and wants and I’ve learned to prioritise the things my family really needs. I try and assist in little ways, but I’ve realised that by not capping the black tax, there’s a risk that some of my family may become fully dependent on me. That doesn’t empower them; it incapacitates them from ever achieving financial freedom and self-sufficiency. I prefer to empower my family by paying them to do real jobs for me or by sponsoring their educational pursuits.”

Saying no is often tricky as black tax is frequently an unspoken pressure, and, when money talk is taboo, financial issues are difficult to bring up. Sbusiso Kumalo, Head of Brand Marketing Capitec Bank, recommends getting a big-picture of your finances, knowing what you can afford – and want – to give, and then having the hard conversations with your family, “It’s better to be upfront in order to manage expectations and protect your financial wellbeing. Holiday contributions to household essentials can still happen, but it needs to be on your terms, within the constraints of your spending plan.”

Here, Kumalo outlines some advice on managing black tax and saving smartly before the holidays hit:

Devise a wise spending plan

Go through your last three bank statements with a fine-tooth-comb to understand your spending habits. Get an overview of your debts, overall income and expenditure. Then grab a calendar and diarise your travel dates and any upcoming family events like weddings, etc. Work alongside a financial adviser to set up a budget for the year, taking into account the holidays and celebrations you’ll need to save for. 

Break the cycle

If you can afford to do so, consider sponsoring a family member’s educational or business pursuits, rather than making lifestyle contributions. Think of formalising this by drawing up a contract of sorts, with specific milestones a family member has to meet in order for you to continue sponsoring them – like passing their first year of varsity. Mbatha also suggests hiring unemployed family members when you need odd jobs done, “If I have a project in my hometown during the holidays, I gather my unemployed cousins to assist. In return, I give them a small stipend, and they gain a skill.” Black tax is often something that gets passed from generation to generation so it’s important for families to educate young people on how to balance family expectations while setting themselves up for long-term financial independence.

Discuss money matters with your partner

It’s not often spoken about, but often, a relationship can lead to partners inheriting each other’s black tax. This can exacerbate the expense of the holidays as both partner’s families could have fiscal expectations of a couple. Discuss the holidays and have a spending plan drafted well in advance so you’re on the same page regarding what you’re willing to (and more importantly, unwilling to) support for both families.

Leave the bank card behind

Consider withdrawing only the cash you’ll need and taking it in an envelope so you won’t be tempted to use your credit card. Alternatively, put the bulk of your salary in your credit card, and take a debit card instead, with limited available funds to curb overspending.

Track using the app

Track your holiday spending using your bank's app or online banking capabilities. This way, you can compare your rate of expenditure with your budget goals. 

Pay all your big bills before you go

If possible, make sure you’ve paid for things like school fees and rent, bond on the first of the month, before you head home. 

Open a savings account or sign up for a stokvel

Stokvels can help combat black tax by enabling saving before big events. Their popularity has grown; in fact, 88% of black people participate in informal saving schemes like stokvels and burial societies. Some of the more common types of stokvels include:

Grocery stokvels: These are frequently used to buy groceries in bulk for the family from factory stores that often offer discounts.

Burial societies: Funeral stokvels and burial societies are used to save for the unexpected. While a funeral policy may help to cover the cost of the actual service, it’s unlikely to cover all the travel expenses and other niggling amounts. A stokvel or savings account can therefore help supplement the extra and unexpected expenses.

Education stokvel: Often, people overspend over the holidays, only to find there’s no money for school fees come the new term. Education stokvels and savings accounts help to ensure that important expenses like education are always prioritised.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24