Financial literacy is the process of the acquisition and comprehension of knowledge, skills and experience required to make informed and constructive financial decisions. The creation and maintenance of generational wealth cannot be achieved without financial literacy. The quality of financial literacy, acquired through formal or informal financial education, directly impacts the wealth that can be acquired.
Historically, the Black community has been financially incapacitated and, as a result, vulnerable. In a survey in 2019, it was discovered that the median and mean wealth of Black families is less than 15 percent of white families.
In addition, women are more likely to be financially insecure and endangered. In 2020, according to the Bureau of Labour, women's annual earnings were 82% of men's, with a wider gap for women of color; Black women earn 61 cents for each dollar their white male counterparts do. The intersection of race and gender subjects Black women to bearing the brunt of wealth inequality. The underrepresentation of Black women in high income sectors—which excludes them from high earnings—as well as underpayment in other sectors, leaves the typical Black woman with scraps from which to feed.
Contributing factors to the gap in financial literacy and well-being
The Education Gap
Decades ago, educating young girls was viewed as unnecessary, as well as a waste of time and resources. Women were viewed solely as managers of household responsibilities and bearers of children. Women didn't need education to perform these roles. This created an even wider gap in education for Black women .
According to a survey by the International Journal of Innovation and Research in Educational Sciences, students who had obtained an average grade of between 80% and 89% in secondary/high school also obtained higher financial literacy scores than those who had received an average lower than 80%. Furthermore, those who had obtained an average of higher than 90% obtained an even higher financial literacy score. Formal or informal education has proven to provide the amount of environmental exposure, interactions and cognizance required to build financial literacy and well-being, which establishes the relationship between education and financial literacy.
Gender and Race Prejudice
Prejudice is an unfavorable and preconceived belief, opinion, or assumption about a person or a group of people based on their integration and membership to a particular group (which can be related to gender, race, ethnicity, etc.) and not based on reason or logic. Black women are subjected to both gender and race prejudice, the intersection of which is called misogynoir. One of the misconceptions that comes as a result of this is the narrative that Black women do not contribute enough financial resources to their families and society in order to receive the same pay as their male counterparts who are assumed to contribute more. Consequently, Black women have not been expected or historically able to amass wealth.
Traditionally, women who have challenged this status quo have had to do so silently.
As an example, according to the New York Times, Mary Ellen Pleasant, one of the first Black self-made millionaires, put many of her investments in the name of Thomas Bell, her bank clerk, to avoid questions as to how a Black woman could own such an amount of money. She gained most of her knowledge from utilizing profitable investment tips through her employers’ conversations, which she overheard while working as a domestic servant.
Ultimately, this prejudice has produced multiple generations of women who have internalized this inequality, and, as a result, who are completely unaware of the methods available to build wealth, making them easy prey for systemic misogynoir.
FINANCIAL TIPS EVERY BLACK WOMAN SHOULD LIVE BY
Negotiate for higher pay: According to a Glassdoor survey, “Women negotiated less than their male counterparts. Sixty-eight percent of women accepted the salary they were offered and did not negotiate, a 16-percentage point difference when compared to men (52%).” To close this gap, there is a need to unlearn the internalized narrative that Black women deserve less financial remuneration. Additionally, Black women need to stop selling themselves short and demand the amount they deserve for the quality of services and products they offer.
Zero Based Budgeting - This is a method of budgeting that is built on “Zero-Base,” in which all expenses must be well accounted for in each new paying period. Adapting this method of budgeting prevents people from experiencing unexpected debts and aids in setting realistic and achievable financial goals.
Intentionally seek out financial knowledge - According to a survey by Goldman Sachs, Black women are five times more likely than white men to rely on expensive payday loans due to gaps in financial knowledge and limited access to formal credit . It is erroneous to think the knowledge needed to attain financial literacy shouldn't be sought for actively. For many, the internet is the largest hub of resources.
Invest and save diligently- The average value of a white woman’s home was $74,000 in 2007, while the average equity of an African American woman was $47,000. This is largely due to a lag in diligent saving and investment choices. Because of this, there is a fall in asset value and increase in liabilities. Black women should seek to build a lifestyle of building financial assets by making decisions that result in multiplication of wealth— not depletion.
Neil Bhutta, Andrew C. Chang, Lisa J. Dettling, and Joanne W. Hsu with assistance from Julia Hewitt, Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances
Veronica Chambers, Mary Ellen Pleasant
Tania Morris and Vivi Koffi,The Link between Financial Literacy and Education of Canadian University Students
Career Advice Experts, 3 in 5 Employees Did Not Negotiate Salary
Daan Struyven, Gizelle George-Joseph and Daniel Milo, Black Womenomics
Katherine Richard, The Wealth Gap for Women of Color
Gita Sen, Piroska Östlin, Asha George, Unequal, Unfair, Ineffective and Inefficient - Gender Inequity - WHO