African Americans account for 13% of the U.S. population.(1) Their economic impact is significant, with $1.2 trillion in purchases annually, representing more than one-third of spending in several product categories.(2)
Nonetheless, according to research by TIAA Institute and the Global Financial Literacy Excellence Center, the financial situation of African Americans lags that of the U.S. population as a whole and of whites in particular.
This lag underscores the need for financial advisors to work with their African American clients to help improve their financial-literacy levels during Financial Literacy Month, which is currently under way, and in the months ahead.
According to the survey, simple economic indicators illustrate the gap. While 66% of African Americans report that they are doing at least okay financially, the comparable figure among whites is 78%. (3)
The median household income among African Americans was $35,400 in 2016; the median household income of whites was $61,200.
African American household net worth was $17,600 in 2016 and 19% had zero or negative net worth; the analogous figures for white households were $171,000 and 9%, respectively. (4)
The gap is evident in more nuanced indicators as well, the survey notes. According to the 2018 National Financial Capability Study (NFCS) (5):
*Forty-two percent of African Americans who were employed full-time also engaged in additional work for pay; the comparable figure among whites was 28%.
*African Americans are more likely than whites to feel that they currently have too much debt (45% and 35%, respectively).
*African Americans are less likely than whites to be homeowners (42% and 66%, respectively). Among homeowners, African Americans are more likely to have been late with a mortgage payment in the past year (46% compared with 14%).
*African Americans are more likely than whites to carry student loan debt (41% and 21%, respectively). Among those with student loan debt, African Americans are more likely to have been late with a payment in the past year (59% compared with 35%).
*Among credit card holders, 68% of African Americans engage in expensive credit card behaviors compared with 36% of whites. Such behavior includes paying only the minimum due, incurring late payment fees, incurring over-limit fees, and taking cash advances.
- U.S. Census Bureau QuickFacts. Population estimates as of July 1, 2018.
- See The Nielsen Company (2018).
- See Board of Governors of the Federal Reserve System (2019).
- See Board of Governors of the Federal Reserve System (2017).
- See FINRA Investor Education Foundation (2019).
Paul Yakoboski, TIAA Institute
Annamarie Lusardi— The George Washington School of Business and the Global Financial Literacy Excellence Center(GFLEC)
Andrea Hasler—The George Washington School of Business and the Global Financial Literacy Excellence Center(GFLEC)
(Any opinions expressed herein are those of the authors, and do not necessarily represent the views of TIAA, the TIAA Institute or any other organization with which the authors are affiliated.)