'Black tax': The dark cloud on personal finance

It is said that money talks. And whenever it does you better pay attention.

Arguably, money is a language everyone understands or ought to understand. Whether you are speech impaired or you are the best orator, sight impaired or your vision is 20/20, deaf or you have your ears on the ground - the money language knows no boundary.

And this is the language Kenyans speak, at least with regard to their relationship with their rural folk – even when it might be detrimental to their financial health.

While the debate about black tax has been told and retold, it seems Kenyans are not sending money to their extended family just because of the burden to support their retired parents or aunts, uncles and cousins who depend on them.

It is because of respect.

The latest paper on how Kenyans save and invest shows this trend.

That even when normal day-to-day upkeep is needed by the extended family and there’s a major reason why money is wired back home, almost an equal number reveal that sending cash affords them better treatment.

It mimics a common joke among Kenyans around soft drinks krest and stoney that are manufactured by the Coca-Cola company: “You will feel at your lowest when you are the broke one in a family gathering. No one asks what soda you will take, they just surprise you with a warm krest or stoney.”

No wonder Kenyans ensure that despite the tough going, they have to send money back home.

The paper, published June 2022, by Enwealth, a financial services company in partnership with Strathmore University and the Institute of Human Resource Management, shows that eight in ten (84 per cent) Kenyans regularly extend financial assistance to their extended family.

About 831 respondents were targeted. These are members of pension schemes.

According to the discussion paper as well, 43 per cent of Kenyans note that their family members treat them better when they send them money. This is from the 13 per cent who agree with the statement and 30 per cent who strongly agreed.

Additionally, seven in 10 of the population “feel obligated” to send money home. This is as 86 per cent send money at home in case of emergencies.

When it comes to usage, the extended family uses the cash for day-to-day upkeep such as buying meals and transport, followed by school fees and medical expenses.

Other uses are buying farm-related expenses like fertiliser, burial expenses, upgrades such as new phones or home appliances, and entertainment such as Christmas celebrations.

The paper shows that 86 per cent of the respondents agree or strongly agreed with the statement that they send money to their extended family in case of emergencies.

“Furthermore, 72 per cent of the respondents agreed or strongly agreed with the statement that they feel obligated to send money to their extended families,” says the paper.

Some 22 and 16 per cent of the respondents “strongly agreed” and “agreed” respectively with the statement that “sustenance money for family strains my budget.”

Several financial advisors have weighed in on the money and relatives and how it can drain one financially.

When The Standard interviewed Edith Siddondo, a certified money coach, founder and chief executive officer of Profit Acumen, she emphasised the importance of creating healthy boundaries.

Siddondo, also an author, noted how nerve-wracking it can be to set boundaries as individuals do feel obligated to give because “it’s family” at the expense of their personal finances and long-term money goals.

“The truth is, you can’t control the expectations that family members and friends have of you, but you can choose to let go and focus on what you can control which in this case is to take good care of your finances and this will even allow you to support them from a more empowered position,” she said.

Siddondo also said there are situations where some people pride in being depended upon and use this as a way to manipulate and control people.

“In my opinion, the ‘control through money’ narrative is where a lot of negative money messages get passed down generationally and this does a great disservice to our society,” she said.

Siddondo says that many people find it difficult to say “no” to someone asking for help.

“This can be especially true when the people asking for help are family or close friends and the help they’re asking for is money,” she said. “Because of this inherent fear of saying ‘no’ a number of the working population have found themselves tripped up by co-dependency when it comes to money and family. What we call financial co-dependency.”

She says financial co-dependency occurs when we make the financial needs of others greater than our own financial needs. Typically, financial co-dependency plays out with family members and can also be seen in relationships with friends or significant others.

Siddondo said when turning down a request for financial assistance, you don’t need to justify your actions or provide any explanations.

“A simple ‘no’ can suffice,” she said. 

“Being able to say ‘no’ can go a long way in helping your relationships with others. As difficult as it is, sometimes we do need to say ‘no’ and it is important to know your boundaries ahead of time, communicate them to others, and stand by them,” she added.

The report by Enwealth states that there is a need for increased age-based financial literacy programs. This is in order to equip Kenyans to better manage their finances and debt as the majority of the respondents noted that mobile banking lending apps have a negative effect on their saving habits.

“Additionally 84 per cent of working Kenyans are providing financial support to their extended family on a regular basis adding to their financial strain,” the report reads.

This strain makes it a challenge for a majority to save. Even when their intention is to keep away some money for a rainy day.

“There is the intention to want to save, however, Kenyans continuously experience challenges in actualising the behaviour. These challenges include lack of enough funds, the need to support extended family, availability of quick loans via mobile phones which negatively affects savings behaviour,” the report reads.