Nearly 50 years have passed since Martin Luther King Jr. gave his famous “I Have a Dream” speech. In those 50 years society has made some great strides to bridge the discrepancy between African Americans and the rest of the population. Recently Prudential completed a study on how African Americans compare in their financial lives. While the gaps are closing, there are still some key differences in how this group approaches finances. Among the findings, African Americans have debt reduction as top priority.
When it comes to saving for retirement African Americans do not do quite as good of a job as the rest of the population. In fact even though half have an employer sponsored plan available many contribute less than what is needed to get the full match or they have taken loans from the plan. Despite the lack of savings, however, African Americans are more likely to own insurance products than the general public, and the average retirement age is 56 years old (opposed to 59 overall).
When it comes to debt, African Americans hold it in a different light than most people. They are more likely (94%) to hold some sort of debt than the general public (82%). Even when it comes to school debt African Americans are twice as likely to be in debt. While it speaks volumes that just 50 years ago most of those in this group would not even be able to attend school, let alone carry debt from it, it does show that there is more work to be done.
Despite the fact that savings are less and debt is higher, African Americans tend to have a more positive attitude about their financial goals and futures. They are much more likely to be confident and optimistic about making money decisions than the general public, and more at ease with their financial lives.
The reason for this confidence may come from the same reason they are less likely to save and more likely to have debt. African Americans often have family members that they support (multi-generational living). 6 out of 10 support someone else, and 10% support a parent or grandparent (compared to just 4% for the general public). This emphasis on caring for the family causes comfort, and less pressure to save and pay down debt.
There have been great strides taken to create equality amongst all people groups. And although there are still some discrepancies, it may not be due to discrimination. Instead it is a cultural issue on what is valued in the ethnic group. They care more about the risk side of their financial plan so they can make sure their loved ones are taken care of if they are not around. Instead of fretting about the future, they know that their children can, and will, care for them when they are elderly.
There are lessons to be learned from all people groups. And the world would probably be a better place if we took better care of our family members. It may mean less retirement savings and more debt, but it would keep us closer together and keep the family intact. With the African American community it appears that they have caught up financially and the areas where they trail are not caused by undue pressure.