Growing up in an immigrant household, the topic of money was not openly discussed. My parents—having left their home country to come to the United States—did not come here with an abundance of money. Their financial mindset was often rooted in scarcity, and its branches sought to focus on saving only.
Saving money was instilled in me at a very young age, so much so that I often thought of money as a lake. Like a lake, all my money was static; I was only ever adding to it, never using it to grow itself exponentially or naturally change over time. However, the 26-year-old me has come to understand the real root of this idea.
The water analogy is the greatest lesson I’ve come to know about money. It seeks to liken our understanding of money to either a lake or a river. When money is viewed as a lake, it means we are constantly storing and collecting it while it remains in one place. This ideology holds the concept of money as solely static. However, when we think of money as a river, it’s accepted as constantly moving in and out, as if following a current. It has the capability to grow itself rapidly but also maintain a continuous equilibrium.
This metaphor completely transformed my viewpoint of money because—like the many people who view money as a lake—I was only worried about contributing to my savings and would panic if large sums of money had to be taken out. A scarcity mindset can emerge, pushing one to constantly save with no intention of putting that money to use.
However, when one has a river mindset, they understand that money has the ability to come and go in your life. They are not worried about losing money, because they know that they can also gain that money right back. Shifting my understanding of this money-as-water analogy has brought peace and stability to my mental health.
Growing up, I was obsessed with saving as much money as I could. Investing was not a term I was familiar with—all I knew was save, save, save. But what exactly is the issue with this fixation on saving?
Studies have shown that most women retire with only two-thirds the amount of money that men do. The reason for this is that women have saved 71 cents of every dollar they’ve earned in cash. Like myself, most women are saving their money instead of investing it, and seeing minimal compound growth. With Black women specifically, about 60% are not investing in anything. The reasons attributed to why Black women are not investing are lack of confidence, lack of money, and aversion to risk.
Initially, when I began my investment journey, in order to curtail my lack of confidence I poured an insane amount of time into researching. The pandemic afforded me time to really dive into increasing my finances in order to build on the choices that I made. The increased availability of investment apps primarily made it easy to enter the world of investing.
Additionally, if you’ve been on social media at all the past two years, you’ll know that money growing without constantly being monitored has become a common financial goal for many people. There was an enormous uptick in content creators talking about investing in cryptocurrency and the stock market, and as well as a push to focus on creating generational wealth. Many women credit the increase of Black female finance influencers—or ‘finfluencers’—as a reason for their increasing confidence and being less risk aversive.
However, aversion to risk does not disappear with increased confidence. One of the key reasons Black women are not investing is due to a limiting money mindset. A study found that around 50% of women with incomes of $30,000 or greater, as well as a third with incomes $200,000 or greater, have “bag lady syndrome.” In other words, they “often or sometimes” fear losing all their money and becoming homeless in their old age.
I believe a lot of Black women suffer from bag lady syndrome—not due to a lack of financial literacy, but because of their limiting views about money. Still, we cannot have a conversation about Black women having this detrimental mindset without conceptualizing the core of the problem: lack of financial education, wealth and income gaps, and lack of trust in the financial services industry.
How do we overcome these problems?
As I mentioned earlier, the rise of financial influencers has increased accessibility to financial literacy. Additionally, many financial institutions, such TD Amertiride, have a plethora of finance education videos on their website. When I embarked on my journey, I utilized a combination of both resources to gain more knowledge about investing.
Nevertheless, overcoming Black money obstacles is an institutional problem as much as an individual one. Financial institutions need to be proactive in educating the larger Black population about the opportunities that are offered to them. In today’s society, the best way to overcome this scarcity mindset is to start envisioning your financial circumstances as a river, and never a lake.
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Caroline Thomas-Bailey, Money Moves: How Black Women Are Finding The Joy In Investing
Justyce Watson, Ofronama Biu, You Can’t Improve Black Women’s Economic Well-Being without Addressing Both Wealth and Income Gaps
Sallie Krawcheck, Why “River vs Pond” Matters for Your Money
The American College, Financial Literacy for Black Women
U.S Securities and Exchange Commission, Black Women and Investing