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What’s Stopping Financial Freedom in the Black Community?

September 11, 2020

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We can all agree: Money matters. Money is a tool that gets you from point A to point B. 

As a millennial in the finance space, I hear the terms financial freedom and financial literacy every day. But nobody talks about what it means to be a Black person navigating personal finance in America. 

Our generation was told to go to school, graduate college, then get a job to support your newfound adulthood. 

Statistically, that path is far more difficult for African Americans. 

Black students, especially Black women, often have to borrow more money to fund their college education. 

Once Black Americans do get a job, they face pay inequity in the workplace. That’s how the cycle begins. 

In 2019, Black men with advanced degrees earned 82.4 cents for every dollar earned by a White man with the same degree. Black women earned only 64 cents to every dollar. 

This inequality leads to student loan defaults, damaged credit, and higher interest rates.

Once this cycle of paying off debt starts, it becomes almost impossible to save, invest, or plan to buy a home. The three pillars of what financial freedom and the “American Dream” often look like for many.

Learn about personal finance and use money as a tool to combat systemic racism.

We can’t get economic equality without racial equality.

Understanding how institutional racism works is a key part of beating it. Here's a list of books to help you understand the issues.

So what does that mean?

Start at the beginning. 

Black children start off at a significant disadvantage because on average they start with fewer resources. 

Black families with a newborn on average have a household income of $36,300 according to the 2018 census data, compared to White households averaging approximately $80,000. 

This means Black families have far fewer dollars to put towards saving for their kids’ education. 

Right from the start, the kids are more likely to have to take on student loans and graduate with debt. 

Many black students graduate with a low or negative net worth, which makes them farther from the American Dream even with a degree. 

Can you pull yourself up by the bootstraps? 

Maybe, but it’s not easy.

The current economic system makes it very difficult to pull yourself out of a disadvantaged financial situation. 

I was shocked to learn that Black people only own 1% of big bank mortgage loans. Only 41.7 percent of Black people are homeowners, compared to 72% of white people. 

There’s discrimination against Black people getting mortgage loans, which makes it more difficult for black families to buy homes. 

And that gap lasts for generations. When someone isn’t able to buy a home, they can’t pass it onto their children, so the cycle continues.

Black people own less than 1% of the wealth in America. It’s crucial we look at how that happens.

Final Thoughts

Millennials get a bad rap for complaining, our wokeness to a fault, and our need to throw shade on social media. But, we’re always looking for what’s next.

We’ve exposed systemic racism. Now it’s time to do the work of dismantling it. We need to educate ourselves, then ask: what’s next?

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Melissa Jean-Baptiste

Melissa Jean-Baptiste

Melissa paid off $102,000 dollars in student loan debt in 5 years on a teacher salary. She currently teaches high school English, but implements personal finance lessons throughout the year for her students. As a firm believer in financial freedom and building generational wealth, her current goal is to pay off her new mortgage in 7- 10 years.

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