Newsletter Archive

“Family is not just important; it’s everything.” (Michael J Fox)  

Many South Africans are not just working to support themselves or even their immediate families. Given the country’s high rate of unemployment, it’s not unusual for people to find themselves under pressure to provide financially for their parents, grandparents and even cousins, aunts and uncles.

That’s why today’s working age population is sometimes called “the sandwich generation” – they find themselves in the middle of a sandwich, supporting relatives both younger and older than themselves.

This is particularly acute for many black South African middle-income earners, with a wide family network. There is often an expectation that they will support their extended family financially. This is sometimes referred to as "black tax".

This poses a serious moral dilemma. No one wants to leave family members in the lurch, but how can you make quality financial decisions and plan for your own future in this kind of environment?

Talk about it

Often the biggest expectations come from parents who feel they have a right to be supported. And while parents always deserve respect for the sacrifices they have made in the past, it can be unhealthy to simply give in to every request they make.

Whatever your circumstances, it is always a good idea to start to have conversations with your parents about their finances at an early stage. Never assume that their finances are in good order simply because they never talk about them.

Consider planning generationally. At the start of your working life, for instance, you are likely to have cash flow, but little capital. Your parents, on the other hand, may have capital – at least in the form of property – but little cash flow.

If you work together, your cash flow can be put to work effectively for your parents, while the capital can take a longer-term view that ultimately has benefits for everybody. The most obvious way to do this is to consolidate costs by living together. It can be a tricky arrangement, but it makes finances easier to manage and you all benefit from having a stable home.

Have boundaries

How we manage our children’s expectations can be equally challenging. It is natural to want the best for them and there is often a desire to make sacrifices so that they can be better off.

It is not uncommon, for example, to find people who are struggling to fund their own retirement who still want to give money to their children.

The best way you can help your children, however, is by being financially independent and teaching them to be the same. Set an example for them by investing wisely, having emergency funds in place, being prudent with your spending, and explaining to them why these things matter.

If you do this well, not only will you avoid becoming a burden on your children later in life, but they will also respect the boundaries you have set. If they learn to fight their own financial battles, make their own financial mistakes, and manage their own money well, they will learn resilience and character that will benefit their own financial health.

The wider family

Finally, set your own rules for who you are willing to support financially and who you aren’t. You should never compromise your own finances and personal wellbeing for the sake of anyone else.

If anybody approaches you for money, don’t shy away from asking them hard questions. To be a good steward of your finances, you need to know why they need the cash, what their financial situation is, and whether giving them money once will lead to them seeing you as a cash cow.

Be prepared to write down the terms. If there is a potential that they will ask for money again, you need to have something to check against whether they managed the first amount well. 

Consider their history and personality. Empowering someone who will use the money to further their education or develop themselves some other way is money well spent. But it’s wasteful to give the same money to someone who will squander it.

Ultimately, always be intentional about what you are doing with your money. Nobody wants to hurt their family, and family demands can be a minefield. But if you pre-plan, have rules in place, and understand clearly what you are prepared to do and what you aren’t, you are more likely to be successful.

To discuss managing difficult financial choices, speak to us.