When Black Americans can’t access information about banking and credit cards, other systemic barriers are amplified, from hiring biases to modern redlining.
Many advocates argue that one of the biggest factors is knowing how money and basic finances work. How do you get a mortgage? What’s the best way to use credit cards? How can I get a low-interest student loan? Not everyone has the answers to even these questions. And even fewer of us have the best, smartest answers too.
It’s an information gap that can have a big ripple effect, with the risk of falling behind. If you don’t know how to access loans or credit – or accessing them isn’t particularly easy – that’s a barrier and a very unfair disadvantage.
Most Americans learn the basics, from checking to credit cards to loans, from family members or at school, but also from programs at work. But those resources can vary, and the two biggest factors for predicting financial literacy remain education and household income.
As Black families disproportionately deal with these factors, the deck is stacked against them getting into and thriving with mainstream financial tools.
In December, the unemployment rate for Black Americans rose to 7.1%, more than twice the jobless level for whites, which decreased to 3.2% that month.
The wealth gap remains just as significant. White households hold 84.6% of the total wealth in the US, according to the Federal Reserve, while the wealth held by Black Americans has fallen to 3.8%. (Black households make up 13.4% of the US.)
But not everyone agrees that improving financial literacy can make a real difference. Some advocates and academics argue that holding up education and information as a real solution is nothing more than a "commonly offered myth.”
As two Duke economists argued last year, Black Americans "cannot close the racial wealth gap by changing their individual behavior — i.e., by assuming more 'personal responsibility' or acquiring the portfolio management insights associated with 'financial literacy' – if the structural sources of racial inequality remain unchanged.”
They point to larger forces: "Meager economic circumstances — not poor decision making or deficient knowledge — constrain choices and leave asset-poor borrowers with little to no other option but to use predatory and abusive alternative financial services.”
Other, systemic barriers need to be acknowledged and addressed. Business Insider report recently detailed a few: “In addition to more modern practices like gerrymandering to deprive Black people of their political voice, disparate funding in education, and myriad other factors, two of the main ones driving this gap in prosperity are racist practices in hiring and housing.”
In her MLK address, Treasury Secretary Yellen pointed to the steps the Biden administration had taken to address economic inequities, from directing pandemic relief to communities of color and providing $9 billion to community development funds and minority banks.
Bright is a mission-driven company that provides basic financial education free to everyone. Bright’s app also requires almost no knowledge of finance, banking or even credit cards to help everyone get debt free and build more wealth.
Bright runs automatically, only requiring users to connect their cards and checking account, set a few goals and let Bright get to work.
Bright works for everybody, for every goal and every plan. No credit check is required, and our pricing is always transparent, with no hidden fees.
If you don’t have it yet, download the Bright app from the App Store or Google Play. Connect your checking account and your cards, set a few goals and let Bright get to work.
With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.