This cultural phenomenon is a lived reality in most African households and can impact the ability of many black professionals to save and build generational wealth.
Usually, when young adults exit the nest, they become independent and earn an income to spend as they please. This is not the case with “Black Tax”. There is tremendous pressure to take care of the financial and socio-economic needs of less financially secure family members.
Lindelwa Skenjana, 10X Head of Retail Growth, spoke to Yanga, a young professional within her social circle about how black tax affects his savings plans.
Yanga, for example, has been living independently since the age of 21. As a brand ambassador for an NPO, he takes home an average income of R25,000 but sends a minimum of R7,000 to his parents based in the Eastern Cape.
Says Yanga, “It is unfair that I do not get to enjoy my salary like my peers do. As the first graduate in my family, I am expected to contribute to groceries and to the school fees of my nieces and nephews who are looked after by my grandmother. If I don't contribute, the old age grant is not enough to support the entire family.”
Skenjana states that, "In many instances, young urban professionals like Yanga face a relatively high cost of living, barely covering the basics like rent, groceries, and travel. Unable to save or invest, they face the likelihood of never clawing their way out of the dire financial situation inherited from their elders."
Yanga says, “I wish could put away money for my future for as little as R500-R1000 that I did not have to think about, to protect my future.”
“Black Tax” poses a significant barrier to young professionals hoping to start a business of their own or lead a more comfortable lifestyle. They’re expected to send up to 50% of their post-tax income back to their family and most likely also have to contribute to extra expenses, such as the cost of a family funeral or servicing familial debt.
With all of these obligations to fulfil, it can be challenging for someone at the cusp of their career to consider investing in their own future. Without the relevant financial know-how, they’re unlikely to invest their earnings wisely and put something away for a rainy day.
In order to build their own wealth, they could consider some smart saving options. One of these is a Tax-free Savings Account (TFSA). The benefit of this account is that the holder doesn't pay tax on any interest, dividends or capital gains, and can access their cash whenever they need it. The minimum investment is only R500 per month, making it an accessible investment option, even for early earners.
“As a nation, we have a long way to go, in the same vein, we can only do better as people, when we know better”, says Lindelwa.
If you’re a young professional looking to make more of your earnings, speak to a 10X expert about a TFSA today and start saving the intelligent way.
Lindelwa Skenjana is also the author of A Black Girl's Guide to Corporate South Africa.
