Financial Illiteracy is a Generational Cycle Black Families Are Fighting to Break
It takes the average Black family 228 years to build the same amount of wealth as a white family. Here's what parents and kids are doing about it.
It takes the average Black family 228 years to build the same amount of wealth as a white family, according to the institute for policy studies. And that's no surprise, really—considering the late start that Black Americans got when it comes to wealth access and management, all due to the deep-seated racism that persists (and affects our money) even today. Finally, though, many families like mine are starting to overcome the generational curses that come with all that inequality—starting with teaching their children financial literacy, a way to plant roots towards wealth-building.
Financial literacy was not modeled at home for Eugenie George, a Philadelphia-based financial wellness strategist. As a money expert, a Black woman, and a stepmother, she has committed to a) helping her parents retire with no savings, and b) teaching her bonus children how to manage their money.
She explains that the biggest lesson for parents to learn is the difference between financial literacy and financial capability. "Financial literacy is like, do you kind of understand what's happening with your finances, do you know how to pay a bill?" George tells Parents. "I would argue that most Black folks actually do have financial literacy in that sense. They're able to survive. But the biggest piece that's missing is taking it to the next step, [and asking yourself,] do I see myself as being financially capable of either teaching my kids or myself how to take the next steps?" Since George's parents, like many Black parents, stopped supporting her at a really young age, she had to stumble through lessons on her own in order to overcome living paycheck-to-paycheck.
"I watched as my family home just went away," she says. "I've witnessed what happens if you don't pay your bills." George's mom always had a stable job, but she was never able to figure out how to save money. So, saving was something George dived into on her own—determined to eventually be able to help her family with it, too. George's advice for parents? Before even beginning to teach your children about money, first figure out your own finances. This doesn't necessarily mean solve your money problems immediately; it means understand what you are dealing with.
"Parents should take the time to study the financial family tree and find out what's going on," George explains, adding that often "women of color are put in the position to be caretakers, so find out who you may be responsible for if something happens—so that there are no surprises." That includes worst-case scenarios, and it will require having uncomfortable conversations with elders. George recommends the book Mom and Dad We Need to Talk by Cameron Huddleston, which teaches adults how to discuss money with their parents—and how to help the older generation make plans.
She also recommends listening to podcasts like Journey to Launch and Paychecks and Balances, both run by Black financial experts who understand how complicated and far back our financial stories go. While taking in this information, you must also evaluate yourself. This can be gut-wrenching, but the education requires examining yourself along the way.
"Are there any savings, or is there anything that you can do to save yourself a future headache?" George asks. That includes looking at your own student loans and how you can potentially afford to help your child pay for college (or not). "If you don't start planning now, you won't get to enjoy your future," George concludes.
Tools like Acorns, which allows you to invest by rounding up your purchases, may offer options for having some money in the future—if you don't have a pension fund or retirement account, like a 401K. George used the website Student Loan Planner to figure out how to pay off her loans and potentially help her stepchildren afford college. Many parents with established credit also add their children as authorized users on credit cards so that when they turn 18, they have history.
Derren Mangum and his wife Cicely, however, are keeping their kids and their credit cards separate. In doing so, they're trying to help their four sons—especially their eldest, who is a freshman at Princeton University—avoid the pitfalls that they themselves faced as young adults. Mangum tells Parents that he believes credit cards give children a "false sense of security and empowerment—until that bill comes."
"I am not a fan of kids with credit cards," Mangum explains. "I think that to have a credit card, you need to have consistent income. I know it's valuable for young adults to be able to have that head start establishing credit history through being an authorized user, but I had some bad experiences with credit cards as a young man that I'm not going to expose my kids to. Maybe we'll extend that to our oldest when he's a junior or senior in college. Until then, I've begged him not to sign up for cards yet."
What Mangum and his wife have been doing, though, since their boys were young, is teaching them the value of saving money via an allowance. "Derren and I have differed about giving the boys allowance consistently," Cicely explains, "just for the sake of it, or as a salary for chores. But allowance is a lesson in money management. And they have been learning lessons...basically, an allowance is just the start."
Neither parent was fully aware of their own parents' financial situations. Derren picked up on frugality and that earning money and hard work were important; Cicely had a piggy bank and savings, and for milestone birthdays, she received savings bonds—which would eventually enable her to study abroad in Paris while in college.
"Ultimately, I was taught 'all or nothing,' Cicely says. "Money comes in, and it goes out. It wasn't really a fun relationship. It was: You earn your money, you see something, you want to buy it, you pay for it—and you're depleted again, which is not healthy."
Derren explains that he and Cicely "wanted our children to have a better footing." So what's their approach? "We have age-appropriate conversations as they come along, and we encourage them to have a better relationship with money. They're now learning about savings, investing, prioritization, risk, and security—as much as you can as a kid."
Both parents do recognize that their children are privileged; they don't have to worry about their needs being met, like many families do. Their children are able to learn about money with a sense of curiosity instead of desperation, and without the money trauma that lower income families deal with. They do get an allowance, which they save and use to purchase wants, while their parents take care of all of their needs.
"Overall, Black people have the lowest amount of wealth of any other ethnic groups," Derren adds. "A lot is the legacy of racism that has prevented us from establishing a footing. It's hard to advance when you're always struggling to gain stability, and without the knowledge that other cultures pass down through generations. You don't even get to the point to explore investment if you're worried about paying the bills."
As for your own family's financial journey, whether you're struggling with your finances or already consider yourself to be a money-savvy cycle-breaker, it's crucial to help your children can get a handle on their own relationship to money—and even begin to build their own wealth—well before they leave the nest.
With planning and education, Black families can begin to fix the financial chasm that history has created without our consent.
Resources for your family’s financial tool kit
- Biz Kids on PBS
- Finance 101 for Kids by Walter Andal
- Finances for Kids by Sesame Street
- Learn to Money, a series by Financial advisor Tyrone Ross, Jr.
- Greenlight ATM cards teach children money management
- Acorns Early lets you begin building your child's portfolio
- Afro Economics podcast
- Make Your Kid a Money Genius (Even If You're Not) by Beth Kobliner