3 reasons why debt is high in Black communities

Recently, I was awarded a Lifetime Achievement Award for creating content in the personal finance space. That award was an acknowledgement of 10 years of ongoing and focused content focused on the ins and outs of personal finance conversations that I wish we'd have more of in the personal finance space. 

A question I’m often asked is, “How can financial educators better educate African-Americans about personal finance?” The assumption being that African-Americans might not have the financial tools needed to change their finances. After years of having what feels like thousands of financial conversations with Americans from all walks of life, I can tell you that African-Americans have similar financial experiences to other Americans. 

However, there are a few key differences that impact the financial choices we’re making.

Before I share my opinions, I would like to mention that I don't speak for the entire Black Community. I’m specifically speaking from my own lived experiences and observations.

1. Poor money management trickles down from generation to generation

I distinctly remember noticing the change in my family’s finances after my parents divorced. Money was always tight before, and it was noticeably tighter when it was just my mother and me. 

I learned how to stretch a dollar, how to look for good deals when buying groceries, and the importance of hard work. My mom and other family members taught me the importance of basic financial management, real estate through home purchases, and how to learn about financial tools such as retirement accounts.  

One of the most incredible conversations that I’ve ever had about money was when my Grandma shared how she learned about 401k accounts and how she invested in one for 10 years before retiring. My Grandma was part of the first wave of people who were offered the opportunity to invest in a 401k. 

The first year (at her work) no one had signed up for it. The second year, the company brought in representatives who explained what it was and what the benefits were. They answered employees' questions. She signed up when her questions were answered and she understood that her money would be safe.

My lesson? How important it is to find the best educational resources for products and concepts you’re unfamiliar with, and to wait until you understand before saying yes.

I’m happy to share that my Grandmother continues to have a wonderful retirement and a key part of preparing financially for it was 10 years of aggressively investing in her 401k. 

Related: Simple vs compound interest. What’s the difference?

2. Access to information is key to getting smart about money

For many African Americans trying to increase their financial literacy or save money in a smart way, access to needed educational resources and tools is often the most difficult part of learning more about money. 

Historically, after slavery ended, there was no meaningful way for Blacks to learn about finance and accumulate wealth. World War II and the civil rights movement expanded employment opportunities for Blacks, but the racial wealth gap persists—as well as a lack of access to quality financial education. Today, people of color are more likely than Whites to be steered to subprime financial products without being given adequate information about alternatives. 

It’s extremely hard to level up your financial game without information and access to experts who can answer your questions. 

My Grandmother is a perfect example. She and her coworkers were apprehensive about making a significant financial investment, not knowing anything about the what or the why. Once they had the information, they could choose to take their financial future into their own hands.

Many African Americans still can’t easily get online. Reuters recently reported that in 10 southern states, Blacks are twice as likely as Whites to say that they don’t have internet service at home.

Expanding access is—and will continue to be—life-changing. It’s a primary goal for any community that doesn’t yet have it covered. In the meantime, members of those communities might be able to rely on some of the following resources. In some cases, you’ll need to make initial contact online, but you can get ongoing help on the phone. 

• Your HR department or the company that administers your employer’s 401k program

• Your local bank or credit union

• Family members who you know are smart with money

• Major brokerages (such as Schwab at 800-435-4000 or Fidelity at 800-343-3548)

• Pro bono (free) financial counselors

• Advisors Give Back for free investing advice

• HUD (the US Department of Housing and Urban Development) for free advice and information about housing at 202-708-1112

Related: Breaking down installment loans

3. More financial educators representation matters

I feel a little nerdy saying this but, I’m a content creator in the personal finance space. I love to share financial stories and concepts in ways that are relatable and thought-provoking because sometimes personal finance content can be, well, boring. 

But that boring stuff can be just what we need to know, to create the life we want. Happily, increasing numbers of African-American content creators share their unique takes on financial topics every day via accessible platforms like podcast episodes and social media. 

I like to think that I’m someone’s money bestie and that I’m sharing money conversations that people want to participate in, but they may be afraid or intimidated.

What you can do with the financial info you find

Even with expanded access to resources, information, and tools, be a smart shopper with your financial nuggets of wisdom. Access to valuable information has increased, but so has access to fraudsters, scammers, and information that’s just plain wrong. Financial discernment is an important skill that I learned the hard way. 

Always ask questions and do your own research before making any financial moves. Experts are available to help you understand your options, but it’s up to you to choose reputable sources, and check the motives of anyone trying to influence your decisions. I’m still learning, too. 

I'm proud to be a small part of the changing financial education landscape. It is a privilege and responsibility that I take very seriously.