How Black Culture Influences Financial Planning and Decision-Making


According to research, there are significant differences in financial literacy levels between demographic groups, which leaves people lacking the knowledge and abilities required to make wise financial decisions. 

There’s also evidence to show that personal finance knowledge among Black-American adults lags that of Whites, and this has been the case for decades, even after controlling for occupation, income, social class, and education. 

“Black-American historical and economic experiences have shaped the lens through which black people see money matters”  (Jaronda Jane Miller 2010) and account for the financial literacy gap. In the long run, this hampers their financial security. Hence, the struggle for black financial freedom prevails. 

A Brief History of the Black Culture and the Struggle for Black Financial Freedom

Source: Pexels

Today’s majority of Black Americans are descendants of forced immigrants from Africa to the US that labored for no pay.  When they finally regained their freedom after the Civil War, there was hardly any significant land redistribution granted to them. Consequently, they never had access to land ownership or economic opportunities.

Even when the Federal Housing Authority (FHA) supported the suburbanization of America in the early 1930s and late 1970s through government home financing, Black Americans were intentionally excluded from the program and eliminated from the most outstanding mass-based opportunity for wealth creation in American history. The US economic system has long been a source of disillusionment and mistrust for Black Americans. So to achieve black financial freedom, Black people have developed a unique set of financial behaviors that override the idea of what the majority of society may regard as financially responsible behavior. These behaviors are deeply rooted in their experiences with slavery, racism, discriminatory laws and practices, and general marginalization in the US.

The Influence of Black Culture on Financial Planning and Decision-Making 

Source: Pexels

The Spectrem Group released a study in 2019 that reveals how cultural background and heritage can affect how people invest and view their goals, risks, and financial advice. The study highlights that intergenerational transfers, homeownership opportunities, access to tax-sheltered savings plans, and individuals’ savings and investment decisions contribute to wealth accumulation and families’ financial security. Looking at the history of black culture, it is evident that Black Americans had no access to any of these as they received no significant inheritances from their parents. 

Most Black people grew up in low-income homes where they saw their parents constantly scrambling to make ends meet. Additionally, they were short on financial advisors and didn’t have access to or use investment vehicles. 

Because of this, Black Americans disregard conventional financial advice to put themselves and the needs of their nuclear family first in favor of feeling obligated to provide for their extended and even fictive kin. They are also more apprehensive about debts, usually shy to talk about their finances, tend to invest less, and have less ownership in the stock market than individuals of other ethnicities. Even in their firms, they are more inclined to operate independently and are less likely to participate in partnerships.

The real issue is not that Black Americans are ignorant or simply incapable of learning mainstream financial behaviors,  but that there is a filter through which they make their financial decisions. This filter, which supports and values human family relationships over material ones, is shaped by their family’s and culture’s expectations.


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