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The racial wealth gap is real and well-documented. According to a recent study by McKinsey, Black Americans can expect to earn up to $1 million less than white Americans over their lifetime. Since this difference multiplies over generations, the median white family had more than 10 times the wealth of the median Black family in 2016, according to the Federal Reserve’s most recent Survey of Consumer Finances. These disparities are not new and are visible in our society for anyone who takes a closer look.

Money and opportunity are often an intangible subject, but the implications of this gap are very clear. For minorities, especially Black Americans, they impact job prospects, wages, loans, and retirement savings. Financial literacy is one proposed solution to eliminating some of the individual challenges faced by BIPOC, while still doing the work required to update and change the systemic policies of racial discrimination and accumulated inequalities.

How the racial wealth gap impacts financial knowledge

A November 2019 study by the Global Financial Literacy Excellence Center at George Washington University and TIAA Institute found that, on average, African Americans answered 38% of their joint Personal Finance Index questions correctly. In comparison, white survey respondents answered 55% of the questions correctly.

It’s pretty easy to track exactly why there’s a discrepancy between these numbers. According to the Next Gen Personal Finance’s report on the 2018–19 school year, 1 in 6 US high school students was required to take at least one standalone semester of personal finance for graduation. Meanwhile, 3.9% of students from low-income schools (defined as one that has at least 75% of students eligible for free or reduced-price lunch), were required to take a personal finance semester to graduate.

Clearly, those who need personal finance education the most have the least access to it in school. For older adults, the fees and costs of financial advisors are a deterrent as well. Also, Blacks generally handled financial literacy questions more poorly than other race groups, reflecting more significant financial stresses.

According to a report published by McKinsey in 2019, the racial wealth gap will cost the US economy between $1 trillion and $1.5 trillion between 2019 and 2028—4 to 6 percent of the projected GDP in 2028. The racial wealth gap draws our economy and society down, even groups who are not directly impacted as a result of discriminatory policies.

While financial literacy is important, we have to be careful about attributing the struggles of the Black community to personal failure

While learning more about money is sure to help individual people, it doesn’t explain the systemic problems facing people of color. It is also certainly not the only or leading cause of the racial wealth gap. Economic events, social norms, and policies go hand in hand with creating an environment of little to no financial options and a dependence on debt. Let’s take one example: bias in employment and hiring choices.

Black people often aren’t hired into well-paying jobs, affecting their ability to earn enough to purchase a home, a major factor in accumulating wealth. The Bureau of Labor Statistics said that in 2018, 54% of employed Asians worked in management, professional, and related occupations — what it described as “the highest-paying major occupational category” — compared with 41% of employed white people, 31% of employed Black people, and 22% of employed Hispanics.

To take it one step further, most companies have employee referral programs that reward existing employees for referring their contacts to open positions in the organization. In 2014, a study found that three-quarters of white people don’t have any non-white friends. It is probable then that most existing white employees end up referring other potential employees that look a lot like themselves, thus locking out even more opportunities for BIPOC.

Where you can make individual change

While closing the racial wealth gap also needs to be supported by government policies to help disadvantaged demographics build wealth, there are things we can do on an individual basis as well. This is where financial literacy plays a major role.

Empower yourself and your community, specifically historically marginalized groups, with financial knowledge. Make a dedicated effort to disseminate the knowledge you have access to. For example, if you took an investment course over the weekend, share your findings with your friends, your book club, etc. If you’re working on your public speaking skills, schedule a 15-minute talk at your workplace, community center, church, or even your parents’ living room. Introduce people to wealth-building tools like robo-advisors, micro-investing, crowdfunding real estate platforms, and books. Here’s our list of books written by Black personal finance experts to start with.

You might be a beginner to the topic yourself but creating opportunities and conversations around finances helps broaden financial literacy among your family, work peers, and broader community.