Black tax is the financial support working young Black people send back home to their families. It originated in South Africa during the apartheid regime. The segregation that Black people were subjected to under this rule led to impoverishment. The lasting effect of the policies led to Black people facing more unemployment, higher interest rates, and wealth inequality.
Many other people of African descent around the world, including the US, face the same income disparity due to varying sociopolitical issues. When Black individuals succeed when the rest of their family isn’t, there is an unspoken obligation to provide financial support. It’s a situation that requires nuance and empathy because systemic injustice can’t be fixed overnight. But there is still resentment towards the black tax.
Why can black tax be a bad thing?
Supporting your family financially is a kindness. But it can come at a cost. Due to the growing cost of living, people may have to increase how much they’re sending, and that reduces their purchasing power. In addition, this eats into savings accounts and takes away investment opportunities. Studies show that black tax is one of the leading causes of financial stress among middle-class South Africans.
Being responsible for extended family members makes it difficult to create generational wealth. Paying for utilities and debt for others lowers the odds of creating wealth for yourself and your descendants. It also creates a cycle of debt because younger descendants may have to use the black tax to take care of you when you’re older.
Having to use disposable income to sort others can affect your mental health. The black tax is also taxing on psychological well-being. Research shows financial stress can lead to stress, worry, depression, and chronic fatigue. The challenge of being relied upon places pressure on you to maintain an income as long as people rely on you. This can affect your peace of mind. Black tax is something extra that you have to worry about.
Black tax creates an inescapable challenge, especially for firstborn African children. It’s a cultural obligation that they have to contribute. Some parents even ensure you know you must support them as they age. When you’re from a low- or middle-income family, other members feel the need to call on you for assistance with almost no regard for what it costs you. Sometimes black tax starts when you’re old enough to read and write. When you’re from a very poor family, every cent you earn must be used to contribute to the family’s welfare.
It can lead to feelings of guilt for those who are not financially well-off. Being unable to help can make people feel like they are inadequately supporting their families. Resentment against their own situation can lead to poor mental health. Conversely, some family members can resort to guilt-tripping to manipulate others to give them more money.
Within families, black tax can lead to miscommunication or hostility when those being supported feel they aren’t receiving the money they could. If you’re working, your family can easily assume you have a lot of disposable income. The mismatched expectations and what can be delivered can lead to tension between family members.
How to avoid the pitfalls of black tax
It may not be entirely possible to refuse to support your family. You can balance your cultural obligations with your financial duties. Black tax is emotional labour—a duty to support your family that’s gone from guardians to younger family members who have started working. It’s possible to meet your financial goals but still assist within healthy boundaries.
Read also: Family: Dealing With Emotional Black Tax
1. Assess your income
Establish where your money is going once you get your income. To get a clear picture, look at your expenditure for the last 3-6 months. Break down the expenses into different categories: rent, utilities, leisure, savings, and external support. Once you’ve made the breakdown, check whether there’s a balance in how much you’re spending on yourself and sending to others. When checking the money sent out, see what they’re spending it on. Where possible, limit yourself to emergencies and essentials.
2. Determine your financial goals
Prioritise your finances. You’re the one who has to survive on your income. Being sacrificial will not be rewarding for your mental and financial well-being. You must set aside an emergency fund for yourself, set aside savings, and keep some money aside to have fun. Once you have set aside what you need, establish what you can provide to help others. You can choose whether to prioritise your parents or your siblings still in school.
6 Financial Goals That You Should Work Towards
3. Remove yourself from the cycle
As you continue to grow your income, set aside money for your emergency fund. Stay disciplined with your savings to ensure you have a retirement fund. If you don’t have a large disposable income, try to remain frugal to have a safety net if you lost your job or faced a salary cut. This will help you avoid maintaining the cycle of over-reliance on relatives. A solid financial plan will help you manage debt and secure your savings, investment, and retirement.
Read also: 6 Tips On Setting Financial Boundaries With Family
4. Set boundaries
To reduce how much you’re spending on Black tax, establish boundaries with the people you’re supporting. If they ask for money to buy groceries, then pay for the shopping directly at the supermarket. If you’re paying school fees, pay the money directly to the school. Sending money directly can lead to leaks within your budget. Enforcing the boundaries will reduce any financial haemorrhaging. Avoid handing out loans because this can create fiction. If they need cash, give it as a gift.
Read also: 10 Tips For Borrowing And Lending Money To Family And Friends
5. Provide financial literacy
For your retired relatives who need help, empowering them financially for their future may not be possible. But for your peers or younger relatives, teaching them how to budget, save, and make investments can help them reduce their reliance on you. If they have business ideas, help them outline business plans, seek investors, or help them with grant applications.
The black tax may not kill you, but it doesn’t necessarily make you stronger. You can’t ignore or cut off family, but you can reduce the burden you can bear. Withstanding the resentment that comes with black tax may be a necessary part of life.
Check out
Dealing With ‘Black Tax’ Part 2: Building Generational Wealth To Break The Black Tax Cycle
Family: Dealing With Emotional Black Tax
Growing Your Wealth: 9 Steps To Financial Freedom
Why You Should Change Your Perceptions About Money
Your People Vs Mine – How Couples Can Manage Extended Family Financial Responsibilities Better
