When we think about our heritage, we might imagine the parts of it that include food, culture and history. However, an important aspect of our heritage that is often overlooked is how we handle our finances.
Money habits are something we observe from our parents, grandparents and those nearest and dearest to us when we are very little. Their relationship, experience and behaviour with money can influence how we view and manage our own finances, and we may inadvertently pick up these engrained ‘historical habits’ – for better or worse.
However, recognising the ‘inherited’ traits that hinder and hold us back financially is key to levelling our country’s economic playing field, which is where financial literacy can assist us in growing into smart, financially-free adults.
“Perhaps our parents struggled to make ends meet and found themselves turning to credit to get by. This could lead to us viewing debt as a necessary part of life – not realising that we have the power to take control of our spending and lending,” says Naledi Totana, Compliance Officer at local debt advisory firm, National Debt Advisers (NDA).
According to the Financial Services Conduct Authority’s (FSCA) ‘Financial Sector Outlook Study 2022’, more than 50% of South Africa’s credit-active consumers are over-indebted – and this number continues to climb, thanks to the economic toll claimed by the pandemic. The report found that between 2015 – 2020 the number of credit-active consumers with an impairment record fluctuated from 38% – 48%.
“It’s never too late to change our behaviour and set ourselves on the path to live a comfortable life. It’s also our responsibility to model sound financial behaviour and instill positive habits in our children, so that they are free to build wealth, and are not plagued by financial difficulty.
“Financial literacy will play a key role in helping the South African economy to recover and flourish in the years to come, leaving a fruitful heritage for generations to follow,” says Totana.
Totana breaks down some of the important things to consider when it comes to our inherited financial habits – and what we teach our children.
Financial literacy a key factor to growing wealth
“Our parents may not have been financially-savvy, but we don’t need to accept this as our lot in life. Taking control of our money now can make the world of difference to our future financial wellbeing – and that of our children, says Totana.
“It is important that we take the time to understand our finances and invest in that which will help safeguard our future, such as insurance and retirement savings. Make sure you take the time to teach your children basic financial concepts, such as saving, budgeting and credit. Before they can learn good financial habits, they first need to understand the value of money and why it should be handled with care,” she says.
Adopting good financial habits
“Remember that your children not only listen to what you say, they see what you do. Therefore, if you want them to practice good money habits, you need to set the example.
“Let them sit with you when you draw up a simple household budget so that you can teach them the importance of not letting their expenditure exceed their earnings. Help them to identify the difference between a luxury and a necessity when you go grocery shopping. Also, show them the importance of saving from an early age, through paying them a small allowance, giving them a piggy bank or opening a bank account for them,” she suggests.
Know the difference between good and bad debt
Perhaps our parents were too reliant on credit or occasionally turned to loan sharks to make ends meet. Totana believes that there’s no need for us to perpetuate this legacy.
“It is important for us to first understand the difference between good and bad debt, before we can pass this knowledge on to the generations that follow. Good debt has the potential of creating additional income streams or building our wealth, and could include things like investing in a home, starting a business, or spending on a child’s education. Bad debt usually refers to that which depreciates in value, draining your income through steep debt servicing costs.
“Bear in mind that whether debt can also be classified as ‘good’ or ‘bad’ is also down to affordability. Yes, a house is an investment, but if you cannot comfortably afford it, it might cause you severe financial stress.”
If you find yourself drowning in debt, she says that it is important to also recognise this and seek help in the form of a qualified debt counsellor, who can help you structure a repayment plan that will allow you to chip away at it in manageable chunks. There is no shame in this, adds Totana, and taking ownership and responsibility for debt is also positive behaviour that you will model for your children.
Totana concludes, ‘’Learning new habits and passing these on to our loved ones will be a key part of changing our country’s collective heritage for the better.”
BLACK TAX
Black tax (or giving back to one’s family) is often associated with one’s herritage and family history.
While black tax is often portrayed in a negative light, South Africans who bear the responsibility for extended families can find ways to empower themselves and their families financially through good practical suggestions to build generational wealth, thereby leaving a legacy for the future.
Sipho Mncwabe, Head of adviser for transformation at SanlamConnect says, “The family responsibility which has come to be known as ‘black tax’ is deeply rooted in the African way of being. While admirable, if not managed well, shouldering this burden can be financially draining. With the right financial guidance and an integrated approach to financial management, we can change the narrative and turn black tax into a vehicle that can help many South Africans live with confidence.”
Mncwabe and Farzana Botha, Segment Solutions Manager at Sanlam Savings, believe that ‘black tax’ can help unite families, through honest conversations and shared goals:
Know your limits and stick to them:
Being honest about what you can and cannot afford, especially when confronted with family members who may be experiencing challenging times, can be difficult. Nonetheless, it is an important lesson to master. Overstretching your budget has the potential to leave you unable to assist your family or yourself.
Mncwabe says, “It is important for caretakers to realise that decades of unbalanced allocation of resources have resulted in inequality and poverty for many South Africans. Against this background, it is important to balance one’s compassion with realism and accept that we will be one of the links in a chain of change.”
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