Most young people start work burdened by student debt and are simply never able to save money.

To cover arrears, they take out more loans and get stuck in a cycle of debt that can last their entire lives when not dealt with properly. To add to the list of expenses, taking care of the extended family’s household expenses (called black tax) is a responsibility that is hard to avoid.

The lack of financial education makes matters worse. Move! speaks to financial advisor Rene Maritz and Dave McCall, an executive of Investments, Retail and Business Banking at Nedbank, on ways to deal with black tax without putting a strain on your bank account and ruining any relationships.

READ MORE: WATCH: What do people think of Black Tax?

FINANCIALLY PREPARED

Rene explains that black tax is something that is inherited from previous generations who weren’t financially prepared for retirement. So the only way to break the circle is to be financially educated and prepared for the future. “According to the Financial Services Board, only six per cent of South Africans are financially independent when they retire. The other 94 per cent are usually dependent on their families, friends and government,” says Rene. “Black tax can put you in financial trouble later on in life and around your retirement phase your children will then feel the need to take care of you, and so the cycle continues.” Rene lists a few ways to break the circle so the next generation of your family won’t be obligated to take care of you when you retire:

  • Decide and make it clear to all family members what you are willing to spend money on
  • Work on an emergency fund for those expenses
  • Make sure to budget for your saving goals
  • Be disciplined to stick to your budget and rules
  • Instil good financial habits in your family. “The only way to lessen the effect of black tax is to manage your finances better, with educating and taking care of your finances, every generation after you will be more financially secure than the one before,” says Rene.

READ MORE: Financial institution sparks #BlackTax debate

HOW TO MAKE BLACK TAX WORK FOR YOU

Black tax may not be avoided at the moment but can be managed and prevented. Rene helps us lessen the load with a few points:

  • Agree on how much you can afford: It is difficult, but you need to be in control of your expenditure. Spending too much on your family’s needs can have a negative effect on your finances
  • Ask how you can best provide in securing their needs without spending too much: Only provide for the necessities. At the end of the day, your goal should be to break the cycle of black tax without losing your ‘ubuntu’.
  • Enlighten your family on the importance of financial planning: Emphasise to them about the importance of saving for retirement, death of family member, or for their education. It will help them understand the concept of lowering their demands.

READ MORE: Black tax: sign of appreciation or burden? We find out

BUILDING A FUTURE WITHOUT BLACK TAX

Everyone knows saving is important for minor emergencies or major life changes, but it is just so difficult putting that cash away for a rainy day. Dave says that making small adjustments such as saving, budgeting, managing your banking costs and cellphone bills to the way you relate to your money can make a big difference.