Black Tax has no set definition - it is different things to different people. One working definition might be the financial contributions young black workers make to assist their parents, siblings, or broader family.
While financial family responsibility is universal in that there are South Africans of all colours who face this challenge, what is unique for many Black South Africans is the extent and prevalence of their family financial obligations.
Because of our history of dispossession and segregation, amongst numerous other factors - like education and healthcare access, coupled with high levels of unemployment - many young and middle-age Black South Africans are likely to be the sole or one of a handful of breadwinners in a broader family network.
Indeed, for some families, there may be one individual supporting multiple generations – children, parents, and grandparents. These breadwinners may be the first in their family, or the first in a number of generations, to have received post-school education. This education may have come at a great cost and significant sacrifice from their parents/caregivers. This context can make their family financial obligations emotive and particularly difficult for individuals who also want to achieve financial goals and wealth creation for themselves. Indeed, prioritizing one’s own financial wellbeing may well seem like a selfish pursuit in these circumstances.
It is in this context that financial service providers must ask - how does an individual build wealth and preserve it for future generations if they bear a significant financial responsibility towards their family, and how can the sector help?
The first answer is to make quality financial education more readily available, and free of charge. Financial education can introduce South Africans to an ever-expanding range of financial products that can help them to take care of themselves even as they assist their families.
This critical information can create new opportunities for young people to think about what they want to achieve financially for themselves – a new car, purchasing a home, planning for a child’s education, further education for themselves etc. It also includes looking at current financial obligations and costs and setting an achievable plan to achieve their personal goals when this may seem out of reach.
Another important aspect of financial education is developing a full understanding of when to use debt and when to make its reduction your number one priority. Understandably, in the context of Black Tax, debt may be an appealing option to meet financial obligations. But, if not managed well, it can seriously set back your prospects of home ownership and reaching other goals. If this resonates with you, you may be a great candidate for debt management assistance, for example. While debt management may feel like a financial failure, it’s important to realise that it can in fact be the first small step in your wealth journey.
Understanding more about finances is crucial to knowing the questions we must answer to get on with our own wealth journeys. It also empowers individuals to have tough, but well informed conversations with loved ones about money and what is and is not within their capacity financially.
Doubtlessly, the most important overall lessons financial education can teach is that many things happen by chance, but a financially sustainable future is not one of them. It takes a significant amount of effort, difficult discussions with families about priorities, tough choices, planning, and perseverance to make it happen.
The second important step that financial institutions can take is to provide innovative solutions and products that can meet more than one need for individuals who have family financial obligations. Take the example of funeral cover. For an individual who is a sole breadwinner, or one of a handful within a broader family, it is highly likely that they are paying to cover multiple family members with funeral insurance. This monthly cost can add up and can make other insurance products which could create generational wealth – like disability, dread disease or life cover – simply unaffordable. Hybridised plans which provide more options under one umbrella can provide far more value for meeting personal goals while minimizing the cost of purchasing these individually.
1Life is passionate about helping more South Africans get on their wealth journey, no matter where they are financially today. We will continue to provide free of charge financial education as well as continuously seeking to improve the services we offer to help South Africans secure better financial futures for themselves and future generations.