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- The racial wealth gap in America is very real. As a black woman, my parents prepared me to face it all my life.
- Growing up, they taught me that education is a critical stepping stone to building wealth, just like home ownership.
- I also learned that having a decent bank, i.e. not spending a fortune on tuition or using payday loans, and asking for more money at work are ways to cement a future. financial for my son.
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When it comes to personal finance, race has an impact on the ability to build wealth whether we like it or not.
According to Pew Research Center, the median net worth of white households in the United States in 2016 was $ 171,000, while the median net worth of black households was $ 17,000. When I first heard this figure years ago, I wondered why white households were generally 10 times richer than black households.
Then I realized the important lessons I learned from my parents and society over the years on Black wealth in America.
Black Americans Still Catch Up
As a black woman in America, I sometimes feel like I’m catching up on improving my finances and building wealth. Growing up, my parents often told me that I had to work extremely hard to be successful in any area of my life.
While this is true for all of us regardless of race or gender, my parents tried to tell me that the playing field was not level and that the racial wealth gap was present. Some of us are born with advantages and others with disadvantages. To achieve the same results, a disadvantaged or less privileged person would naturally have to work harder to catch up.
A quick glance at the history and the data shows why many black people can feel behind the times when it comes to building wealth.
- Blacks in America were not able to legally create wealth until 1865 because, until then, they were slaves and treated like property.
- The New York stock exchange begin in 1792, and life insurance normalized in the 1760s – blacks did not have access to either to start building generational wealth
- In 1921, the Greenwood district in Tulsa, Oklahoma, which contained numerous black-owned banks, hotels, cafes, cinemas, and others – known as Black Wall Street – was burnt down and 9,000 people lost their homes to it. racist violence
- Until the 1950s and 1960s, schools were separate and blacks were generally subject to a lower quality education. Today, many predominantly black school districts remain underfunded
- To date, black women only earn 61 cents for every dollar a white man wins, and the labor market continues to be separated by gender and race
- A Harvard Study indicated that minorities who did not reveal their race on their resumes were more likely to be hired for a job
- Black-owned businesses are twice as likely to be denied loans, according to data shared by the Federal Reserve
Knowing the numbers and facts was important to me as it helped me figure out what to do to create wealth over time and leave an inheritance to my son.
Education is an essential stepping stone to success
Growing up, my parents always taught myself and my siblings the importance of education. My mom worked hard to get us into good schools and even had my sisters and I make exercise books in our free time during the summer vacation.
I wasn’t very happy to work in the summer, but eventually developed a love for learning and a desire to read more and strive for academic excellence. I don’t find it surprising that 85% of self-made millionaires read two or more books a month.
Neither of my parents went to college, and I saw how it affected their income and work opportunities. Even though going to college was a must for me, I also knew it would be expensive and wanted to keep my costs low.
Long story short, I attended community college and state university, used grants and scholarships, and then graduated with $ 20,000 in student loan debt which I paid off in three years.
Debt is another financial burden that weighs on many of us, regardless of race, although black students are more likely to take on student debt than their peers and graduates with more debt. Without a co-signer, adequate income, or access to sufficient savings, many people go into debt, which can make it harder to build wealth.
Ask for more money
Gender and racial pay gaps are unmistakable in our society today. While the systems that perpetuate this reality have been in place for many years, it was important for me to see people who looked like me earn more and to hear others encourage me to increase my income.
I remember working the same job for three years and never asking for a raise because I was too scared. A black woman can miss nearly a million dollars income over a 40-year career if she continues to earn 61 cents on the dollar white men earn. I didn’t want this to be my reality, so I started defending myself by asking for raises and having open conversations about pay during my first 9-5 job. I gained 20% increase in two years working in a small startup.
When I started freelancing and becoming self-employed, I continued to advocate for myself and join various communities where I could network with other freelancers, openly discuss compensation, and learn to negotiate.
It also took a change in my mindset to realize that I deserved to be paid more and that there was nothing wrong with wanting equal pay.
Become properly banked
I opened my first bank account when I was 17 and didn’t know anything about banking. As I focused on academic excellence growing up, I still had a lot to learn about personal finance and which banking products to choose from.
After my account went negative and was reported to collections, I was only eligible for a second chance checking account with high fees. In general, according to a national survey conducted by The bank rate, blacks and Latinos pay higher bank charges than white customers.
A McKinsey & Co study indicates that many African Americans have difficulty accumulating savings because they do not have access to traditional financial banking services. From personal experience, I have always noticed that many regions dominated by minorities have more expensive financial services, such as check cashing or payday loan shops. These are expensive to use and help get stuck in a loan repayment cycle.
When i heard about high interest online banks, I opened an account right away. I didn’t know you could open a high efficiency control or a savings account (sometimes without an opening deposit) and pay no fees. Instead of paying interest on my money with debt, the banks started paying me interest on my savings.
Ownership is a way to build wealth
My parents never owned a house when I was young. We were still renting and my mom told me not to spend my whole life “throwing money on the rent”. I partially agree with his point of view – I know that owning a home comes with a lot of financial responsibilities and it’s not the best option for all of us.
Yet I cannot deny my desire to own property and invest in real estate. In 2018, he has been reported that the home ownership rate for blacks was 30% lower than for whites; and the average age of a black homebuyer was 48.
I bought my first home when I was 26, and I know that while our primary residence isn’t much of an investment, I am an asset for the future. While it is entirely possible to build wealth without owning property, those who wish to become homeowners should not have to pay more or have fewer opportunities because of their race, which is the case with African Americans.
Understanding systemic racism and working to overcome it
Systemic racism operates through social, political and institutional structures. It creates disparities in wealth, income, employment, housing, health care, criminal justice, etc.
When it comes to closing the black wealth gap, I still believe it can be done – and that would be great for anyone. If African Americans are able to start creating more wealth, it could improve our entire economy.
It starts with understanding systemic racism, recognizing current circumstances, then educating ourselves and working together to overhaul oppressive systems. It is not something that can be achieved by a group of people. Obviously, teachers had to educate me, bosses and clients had to approve my requests for a raise, and a mortgage insurer had to agree to grant my mortgage. Systemic discrimination and the wealth gap between blacks wouldn’t be as common if we all worked together to improve the system.