There are many well-known historical disparities in the American financial system that have contributed to the current wealth gap between Black Americans and their White peers. The denial of access to wealth-building homeownership and education benefits in the GI Bill, redlining and loan rejections for businesses are several critical components of today’s widely discussed racial wealth gap. Throw in historically lower wages and education gaps and you find there is a staggering difference in wealth by race. White families have roughly eight times the wealth of Black families, according to The Brookings Institution.
This historical context is critical in understanding that individual achievement must be matched with policies that address the framework that has yielded this result.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
Where we are right now
At the end of 2020, a full quarter of Black Americans said they were unemployed, compared with 19% of White Americans, and more than half of Black Americans had an annual household income of less than $30,000, according to the Prudential Financial Wellness Census, compared with 36% of the overall population.
Sponsored Content
1. Black households make less money than their White peers.
After controlling for education, years of experience and occupation, there was a median annual pay disparity of $2,000 for Black women and $1,100 for Black men in 2021, according to PayScale. Over a lifetime of earnings, those differences can add up to hundreds of thousands of dollars.
Sponsored Content
2. Black Americans have higher debt levels and often pay more interest on those debts.
The median debt-to-asset ratio for Black households is 46.8%, compared with just 29.5% for White households, according to the Employee Benefit Resource Institute. Black Americans were also more likely to have to pay more than 40% of their income toward debt.
Sponsored Content
3. Black families are less likely to own homes — a significant source of wealth generation.
At the end of 2020, 44% of Black households owned a home, compared with the three-quarters of White Americans who own property, according to McKinsey. Consider the reference to the GI Bill, which created homeownership wealth for White Americans, including the ability to pass on property wealth to the next generation. The disproportionate number of Black mortgage holders with distressed loans during the 2008-2010 financial crisis also impacted overall homeownership levels. Difficulty getting a mortgage remains an ongoing factor as well. Black mortgage applicants are turned down at a rate that’s 80% higher than that of White applicants, according to an analysis of data from the Home Mortgage Disclosure Act.
Sponsored Content
4. Black Americans are less likely to participate in the stock market.
While more than half of White Americans own some equities, that number falls to about a third for Black families, according to data from the Federal Reserve. Investing in stocks is an important means of building wealth over time and generating the returns necessary for retirement.
Sponsored Content
5. Black students have lower levels of access to financial education.
In states that do not require personal finance education in high school, only one in nine students has access to a stand-alone personal finance course in high school. That number falls even further — to one in 14 students — in schools with primarily Black and other students of color, according to Next Gen Personal Finance.
Disclaimer
1056661-00001-00
Sponsored Content
-
Four Tips to Make Your Sales Presentation a WinnerBeing prepared and not being boring can go a long way toward persuading a potential customer to buy into what you’re offering.
-
Pros and Cons of Waiting Until 70 to Claim Social SecurityWaiting until 70 to file for Social Security benefits comes with a higher check, but there could be financial consequences to consider for you and your family.
-
Now Could Be Time for Private Investors to Make Their MarkThe venture capital crunch may be easing, but it isn't over yet. That means there could be direct investment opportunities for private deal investors.
-
How to Stop Boredom From Ruining Your Happy RetirementRetirees who explore new interests and have an active social life are more likely to find joy — and even greatness — in the newfound freedom of retirement.
-
The Life-or-Death Answers We Owe Our Loved OnesHow our life ends isn’t always up to us, but that question too often must be answered by loved ones and health care workers who don’t know what we would want.
-
Hot Tips for Home Buyers and Sellers Right NowReal estate looks to be especially hopping this spring, thanks to pent-up demand and buyers adjusting to higher mortgage rates. Here’s how you can prepare.
-
Is 100 the New 70?Eating well, exercising, getting plenty of sleep and managing chronic stress can help make you a SuperAger. Funding that long life requires longevity literacy.
-
Nine Lessons to Be Learned From the Hilton Family Trust ContestDisclaimers, good communication, post-marital agreements and more could help avoid conflict in a family after the owners of a wealthy estate pass away.
