The Wealth Gap
Good News, Bad News
According to a Neilsen survey, African Americans earning more than $75,000 a year are the fastest growing income group in the country. However, over the last 20 years the wealth gap between Whites and Blacks has widended considerably. In 1987, Blacks and Whites were separated by roughly $20,000 however, the latest statististics show that gap now stands at about $100,000. One setback for African Americans was the recent implosion of the subprime home lending market. Experts say the mortgage meltdown wiped out a generation of economic progress and could leave its mark on the finances of Blacks for decades.1
While a college education will yield almost one million dollars more more than high-school diploma over a life-time, a survey by the Federal Reserve Bank of St. Louis finds that Blacks with a college education not only fared wose financially than Whites, they also fared worse than Blacks without a college education when it comes to wealth building. 2
Considering student loan debt, an unpredictable economy and/or periods of unemployment, in today's economy, smart money choices are a must for everyone.
1 For Black Americans, Financial Damage from Subprime Implosion is Liikely to Last. The Washington Post, July 8, 2012
2 Why Didn't Higher Education Protect Hispanic and Black Wealth? Federal Reserve Bank of St. Louis, August 2015
Specifics on the Bad News
African Americans face challenges in every measure of economic status.
- While African Americans make up about 13% of the U.S. population, they own just 3% of the assets.
- The average total net worth of white families is $70,000 compared to just $6,000 for African American families.
One part of this gap is explained by the fact that African Americans are twice as likely to be
unemployed as the average American. The unemployment rate is 10.6% for blacks compared to 5.3% nationally.
Those African Americans who are employed earn about $13,000 a year less than whites. Another source of the tremendous racial disparity in wealth is the racial gap in home ownership, the size of which has doubled in recent decades.
(The material immediately above was excerpted verbatim from the "NAACP State of the Disparities Report," published December 2006.)
Wealth versus Income
- African Americans have a median net worth (value of assets owned, minus debt) of $5,998.00, compared to $88,651 for Whites. Even more alarming, 32 percent of African Americans have
a zero or negative net worth.
- Although African Americans are more than 13 percent of the nation's population, their total net
worth is only 1.2 percent of the total net worth of the nation.
This number has not changed since the end of the Civil War in 1865.
(The material immediately above was excerpted verbatim from "The Covenant with Black America," page 171.)
Most of us dream of winning the Lotto, but it rarely happens. Very few of us have a long-lost relative that leaves us a large inheritance. Financial literacy is important in attaining wealth. Learn practical money skills and cost-cutting tricks to make your paychecks stretch. Did you know the average American spends about $20 per week eating out at lunch? That may not sound like a lot of money, but multiply that $20 by 52 weeks and you've spent more than $1000 per year eating out at lunch! Take advantage of apps that help track your spending. Its never to late to learn financial skills that will help you reach your financial goals.