Black Finance


American citizens struggle with financial competence, but African Americans appear to suffer more economical disadvantages. The financial well-being of African Americans lags behind that of the US-population, and of white people in particular. Recent research suggests that generations of African American families unknowingly disregard wealth and place more trust and reliance on income exclusively. Wealth can be defined as the difference between what families own, for example, property, vehicles, retirement savings versus what they owe on mortgages, credit cards and other debt. With most African American households bringing in just above the minimum each month, the ability to create wealth is not an option. This is further worsened by financial crises such as the Covid-19 pandemic.


The pandemic brought various emergencies to all American families, but Black families were more affected. The importance of wealth became abundantly clear during this time. Many Black households needed to rely on their savings to cover both healthcare emergencies and economic fallout from layoffs in comparison to White households. Black workers were more likely to lose their jobs as they faced greater healthcare risks. They worked in jobs with exposure to the coronavirus and live in communities with weaker healthcare infrastructure. As risks and costs soared, they quickly experienced new material hardship.



Black households have a fraction of the wealth of white households. Wealth provides families the opportunity to invest in their children’s education, start a business, and or relocate to new or better opportunities. Many Black workers were more likely to go to work in person and could afford to devote time or pay for reliable internet or electronic devices to facilitate remote learning. In contrast, white communities were likely to work remotely during the pandemic and have resources to devote time to their children’s remote learning environment. The Pandemic has increased the factors that will drive wealth for Black and White households even further apart. Sixty-eight percent of Black families with incomes from $35000-$100 000, who had lost work during the pandemic indicated that they could not afford all of the food they needed, faced eviction and foreclosure and had difficulty paying bills from August 2020


These situations applied to 49.3% of white households in this income category. All types of families suffered during the pandemic, but Black families more because they have fewer savings to fall back on. Black households are faced with various obstacles in generating wealth. These obstacles include: Labor market discrimination, a lack of information to innovation and advancements in technology, denied access to investment opportunities and affordable credit, housing market discrimination and worse treatment in education, healthcare and criminal justice.



According to research obtained by TIAA institute, African Americans could only answer 38% of the Personal Finance index (P-Fin index) questions correctly, whilst only 28% answered over half the questions.

The P-Fin index gauges personal knowledge and understanding in eight areas: Earnings, consumption, saving, investing, managing debt, insuring, comprehending risk and uncertainty, and recognizing go-to information services.

The reason for this gap is complex but mostly due to a lack of financial literacy.


Financial literacy is the knowledge and understanding that enables individuals to make sound and effective decisions on their personal finances. A lack of financial literacy is due to socioeconomic factors, education, and household income. Financial literacy amongst African Americans varied. Men had a 42% P-Fin index in comparison to women who had a P-Fin index of 35%. An overall P-Fin index of 32% was observed in African Americans aged 18-29 years. This finding shows a great need in financial education in early ages. Though Financial literacy increased to 43% between the ages 45 and older, more than 50% would not have the capacity to handle a financial shock.



Although educated and informed, many African Americans repeat patterns for financial literacy they saw displayed as children. This lack of financial literacy repeats itself throughout generations regardless of class or income level. For lower socioeconomic classes, an absence of financial literacy can be detrimental to both adults and children. African American youth, especially males, appear disproportionally imp acted and tend to rank considerably lower when questioned on basic financial literacy concepts when compared to their peers.


Financial illiteracy has led to a negative legacy of financial stewardship in African American communities. Not only is a negative corporate legacy of financial stewardship a result, but poverty, higher vulnerability towards financial bullying (housing discrimination, payday loan shops etc.) among other challenges that are directly correlated to the problem. Though poverty is an effect of a lack of financial literacy it also contributes to the problem in that it limits social circles. It is within social circles (church, school, family, civic organizations) where financial literacy, amongst other skills are taught and caught.

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