10/07/2017 10:36 SAST | Updated 10/10/2017 12:24 SAST

Black Tax And Saving: Don't Become The Family ATM

Start by paying yourself.


Black tax may hamper the financial goals of many South Africans but it is not solely to blame for their financial difficulties, says the head of financial education at Old Mutual, John Manyike.

"Materialism, consumerism, instant gratification and over-reliance on credit are real issues affecting our people," he tells HuffPost SA.

Speaking during the launch of Savings Month, the founder of wealth management solutions company Inkunzi Investments, Owen Nkomo, described the situation in which a recently graduated engineer might find himself in. "He is lured into this new lifestyle but is not mentored or financially astute. Then he starts spending aggressively."

He also supports his family. As a result, saving becomes almost impossible, Nkomo said in Johannesburg last week.

Manyike's concern is that if this generation does not save -- especially for their own retirement -- the black tax phenomenon will likely be passed on to future generations and wealth creation through savings will prove difficult.

Watch our live discussion about black tax with Mpho Raborife, deputy editor of News24, and Gerald Mwandiambira from the SA Savings Institute.

A conversation about black tax, consumerism and saving may be complicated by the fact that "financial spend can be emotional", says the head of consumer education at FNB, Eunice Sibiya.

How people engage with money could be influenced by a number of factors including their background. At a financial literacy session she once conducted, Sibiya says one attendant said: "Money is like the father I never had."

Reckless or overcommitted?

She also cautions against the notion that the black middle class in particular just loves spending. "One may not be recklessly spending, but overcommitted to help."

The latter, she believes, can be managed by honestly expressing to your family how much you can afford.

Saving is possible, Sibiya insists. But how?

Read more from our special report on black tax:

Aside from exercising the discipline to say "no", Sibiya believes budgeting is key.

Manyike agrees: "Start by drawing up a budget and stick to it." Paying yourself, no matter how little, should be on your list of budget priorities.

He also suggests being realistic about how much you can afford to spend on supporting your family. This can help you avoid becoming what Manyike calls "the family ATM".

Sibiya further suggests two everyday ways to manage your personal finances better:

  1. Self-imposed house arrest: The biggest temptation to spend money is when you're out and about. And although this may seem dramatic, don't take any cash or cards with you, if that's what it takes.
  2. Cut down on everyday expenses: While there are easy wins such as packed lunches or foregoing a cappuccino every day at work; car-pooling, downgrading your satellite TV subscription and selling unwanted items for quick cash are a few ways to make your money go further.

The Savings Institute also has alternative saving solutions for those who want to save, but find it difficult to do so.