Report: Black Men Have Less Financial Security Than White Men

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As far as using money resourcefully, there is a massive disparity between Black Americans and White Americans. Consider this: The average value of savings and investments of White men stands at $422,000, more than two times the $168,000 for Black men.

Those disturbing numbers, compounded over time, mean that middle-class Black Americans will have less financial security in retirement and less wealth to pass onto the next generation, says Kelly Johnson, a fixed income portfolio manager with Charles Schwab Investment Management.

As a chartered financial analyst, Johnson has over 25 years of experience in the financial services industry with expertise in institutional investor relations, client portfolio management, and financial advice and planning.

As a first-generation Black college graduate, Johnson recognizes that men over 40–particularly African American men–may feel pressure to “know everything” and have a hard time asking for help, especially when it comes to something as personal as their finances. Johnson cites data from a Black Men’s Data Cut of the Charles Schwab-Ariel Investments Black Investor Survey. He offered some smart money tips to help Black Americans better handle their finances, including:

  • One in three Black men are not invested in the stock market. Johnson recommends that they do not stash their money under a mattress…unless it is for next week’s groceries. He suggests considering investing the hard-earned cash in vehicles like a workplace retirement plan (401(k) or IRA) or brokerage account where it can grow over time and earn interest on investments.
  • Less than one in five Black men have a written financial plan. Johnson’s tip is BYOP…build your own plan. Create a financial plan with an expert, who can help customize a plan for finances and goals. He adds you can also create a do-it-yourself financial plan, which you do not need to have a lot of money for. The first step is just to get your goals down on paper.
  • While just 9% of Black men talked about the stock market growing up, now a whopping 43% talk to their children about the stock market. Johnson suggests investing in future generations. Talking to kids about money early on, he says, can help combat negative money stigmas and encourage positive financial habits that will set future generations up for long-term success.

Of course, people often ask when is a good time to invest in the stock market or some other asset class such as real estate, fixed-income, money market funds, or even Bitcoin. While no investment offers a guarantee, Johnson reflected on the unique challenges Black men face in managing their finances and offered some tips on how they can get started.

BLACK ENTERPRISE connected with Johnson via email to get his take and insights on the survey.

What was the most startling finding from the survey as it relates to Black men not investing in the market?

I was not at all startled by this, but the finding that 76% of Black men are not working with a financial adviser is important. If you are lost, ask for directions. As a group, we often find it challenging to admit that we do not know everything sometimes. While it may feel uncomfortable to ask for help, it is critical for both current and future generations to start talking about money. If you are not ready to talk to a financial professional, start by having conversations in the communities where you feel most at home, whether that is a place of worship or another community organization.

What is a fundamental reason why Black men have not traditionally invested in the stock market when compared to their White counterparts?

There are deep-rooted gaps in participation between Black and White Americans. Our survey found that 55% of Black Americans and 71% of White Americans reported investing in the stock market. Eighty percent of Black men believe racism is an obstacle for Black wealth creation, 70% believe there are not enough Black role models in the financial services industry, and only 9% of Black men talked about the stock market growing up. Lack of access and opportunity and pricing has also likely factored into why Black men traditionally do not invest. There is no doubt that the industry must do a better job of understanding the unique challenges that Black men face.

We know that smart investing and working with a financial adviser are important steps to building wealth, but right now Black Americans are less likely to work with financial advisors (21% vs. 45% of Whites). The more people engage with financial advisers, the more likely they are to save and prepare for their futures. By working with trusted advisers such as employers, community organizations, and faith-based groups, our industry can reach more people who need and want advice.

Why is it so important that Black men invest in the stock market now?

Stock market participation is a critical wealth-building tool, and by not participating in the markets, you are missing out on the opportunity to accumulate wealth in a meaningful way. I would be remiss if I did not note that I was encouraged that our study found evidence of growing engagement in the stock market among younger Black men, with 74% under the age of 40 now participating in the stock market, slightly more than their White counterparts (70%). Even in my own household, I have a son who is in his mid-20s, and he has never shown any particular interest in investing. And one day he asked me about Bitcoin. And I looked at him, and I just started laughing because it just exemplifies how these new investment vehicles have gotten a lot of younger people who did not think about investing before to become interested in the markets.

What are the biggest factors that keep Black men from investing in the stock market and how do they overcome them?

There are numerous factors that contribute to why Black men have not engaged in the stock market, including a lack of financial literacy, less wealth to invest, minimal discussion among families on the topic of money, and a lack of trust in financial service institutions. The good news is that Black Americans now are much more likely to discuss the stock market with their families than in years past. More than twice as many Black investors under age 40 (18% vs. 7% of Black investors 60+) say they discussed the stock market growing up, which has positive implications. I think we can expect more Black men to begin investing.

The survey found that when Black Americans were asked about diversity, it was much more important for them as a factor in engaging with the market than for White Americans. However, they did not necessarily want to work with someone who looked like them. What they really wanted to see was diversity in the workplace, to walk into a bank or investment firm and see people from different walks of life. That tends to make some feel more comfortable.

What is your top piece of advice for Black men as it relates to investing and getting their finances together?

Spend time learning how to manage your money. Do not feel shy about asking for help from trusted sources. Ask questions and never stop learning. Studies show that when people are financially literate, they are more likely to go to college, have higher credit scores, perform better in their jobs, and have a greater ability to manage financial shocks.