A 2021 report by Goldman Sachs found that “due to complex historical factors and ongoing discrimination, Black Americans — and especially Black women — remain heavily disadvantaged across a broad range of economic measures, including wealth, earnings and health. The median Black household owns nearly 90% less wealth than the median white household, and the gap is even slightly larger for single Black women relative to single white men.” The report found that this is largely due to the gap in earnings, with the hourly earnings gap of Black women standing at 15% relative to white women and 35% relative to white men. Other factors include the education gap, capital access gap, personal finances gap and housing gap.
While the wealth gap Black women currently face is daunting, there are steps that can be taken to help close the gap. In this “Financially Savvy Female” column, we’re chatting with Brandy Mickens, a financial advisor and executive vice president of Equitable Advisors’ mid-America branch, about some of the solutions for narrowing the gap.
Start Openly Discussing Finances
Mickens grew up in a household where money, savings and overall financial planning were not discussed, and feels this lack of open discussion is one of the reasons there is a major wealth gap in the Black community.
“To close the racial wealth gap, I recommend Black women discuss a variety of topics with their friends, and also be open to sharing their own personal financial planning journey,” she said. “Talking to friends about money is an incredible opportunity to share experiences with one another and learn some of the common pitfalls.”
Specifically, Mickens wants women to talk about how to recover from leaving the workforce, planning after a divorce and personal fears and concerns about money.
“I think it’s so important for Black women to connect with each other or a financial planner, as there are unique challenges and opportunities that can be difficult to know how to tackle alone,” she said. “I remember when my own mom went through a divorce, she had so many questions around her finances but didn’t know who to talk to. This led to a long delay in her planning for her financial future.”
She also advises her clients who are mothers to talk about the importance of savings with their children starting at an early age so that they instill good financial habits in the next generation.
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Make an Effort To Mitigate Student Debt
According to the Association of University Women, Black women have the highest average total of student debt, at $41,466 for undergraduate degrees and $75,085 for graduate school one year after graduating.
“The good news is Black women are graduating from college at a higher rate than Black men, but the challenge is college often comes with debt, which can prevent them from making other important financial decisions,” Mickens said. “They start saving or planning too late in life as they let things snowball until they are consumed with debt. Also, Black women tend to graduate with more debt because they end up taking on much of the expense on their own and don’t have a safety net, help from their family or some type of inheritance to help cover costs.”
Mickens recommends that when considering college and advanced degrees, Black women look at all options and find something affordable.
“I also recommend they talk to an advisor about paying debts down while saving, and qualifying for student loan forgiveness programs,” she said.
Create a Financial Legacy Through Life Insurance
The Goldman Sachs report found that “single Black women are four times less likely to inherit assets than single white men, which further perpetuates the wealth gap across generations.” Setting the next generation up for success by leaving an inheritance is one way to help narrow the gap.
“Black women are usually the primary breadwinner, head of household and/or a single parent, leading them to make decisions about money every day,” Mickens said. “Black women tend to put significant importance on family and making things even better for the next generation, so leaving an inheritance and a legacy is a very big and important decision. To that end, life insurance is typically an affordable and significant way to leave a legacy to your family and create generational wealth.”
Have an Overall Financial Plan
“Many Black women don’t plan the way they should because they experience advisor bias, or advisors who don’t understand their unique situation, who they are as a person and their relationship with money,” Mickens said. “This can all lead to mistrust of advisors and therefore, a lack of planning. Black women should seek an advisor that can relate to them and empathize with their particular needs.”
In addition to seeking professional help, Black women can make moves on their own to improve their financial knowledge, which can help them create a financial plan that works for them.
“It’s paramount that women are getting involved in financial literacy programs, workshops, etc. so they get the education, tools and techniques they need to collaborate on household financial plans or go it alone, depending on their unique scenario,” Mickens said.
GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.
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This article originally appeared on GOBankingRates.com: 4 Steps Black Women Can Take To Help Close the Wealth Gap