How Black Families Can Achieve Financial Freedom

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It is well known Black families in the United States are at a disadvantage regarding wealth. SCF 2019 data shows the average Black family in the U.S. has the least wealth among families of other races, with an average wealth roughly eight times lower than that of white families.

CC Black Americans consistently show higher entrepreneurial rates than other groups. However, the challenges Black families face are due to deeply rooted discriminatory laws and policies in the US economy that do not favor Black people.

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Evidence shows the racial wealth gap between white and black families has widened considerably over time. And if drastic strategies are not implemented to bridge the gap and offer Black financial freedom, it will continue to grow and persist for generations.

Achieving Black Financial Freedom: Strategies for Black Families

The SFC study highlights that intergenerational transfers, homeownership opportunities, individuals’ savings, and investment decisions contribute to wealth accumulation and families’ financial security.

Using some of these factors, we’ve compiled the following strategies black families can adopt to create generational wealth and achieve Black financial freedom:

  1. Invest in financial literacy.

There’s a strong link between financial literacy and financial wellness, and experts say expanding financial literacy can be the key to Black financial freedom.

A good start for Black families is to teach the younger ones about finances. Engaging them in money matters and teaching them about savings, debts, investments, and management at a young age empowers them financially to make smart money decisions on their own. Parents can use tools like Goalsetter, Flocabulary, World of Money, and more to teach their children valuable money lessons.

Black families can also learn financial literacy by investing in financial literacy books, seminars, and programs, utilizing readily available financial information on the internet such as mobile banking, investment apps e.t.c., and having a personal black financial advisor. 

  1. Clear and avoid debts.
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Source: Pexels

Black Americans are much more apprehensive about debt than their white counterparts, and research shows hefty credit card balances, student loans, auto loans, and home loans are some of the major causes. However, avoiding all forms of debt would significantly impact black families’ ability to generate wealth and maintain their financial well-being.

Here are some tips to help:

  • To avoid credit card debt, make credit card payments on time, limit the number of credit cards you use, track all credit card spending, make purchases with cash or a debit card instead, and avoid unnecessary balance transfers.
  • To avoid student debt, limit the number of student loans you request and only use loans for educational expenses.
  • Only buy what you can afford and compare prices before making any purchases.
  • Have an emergency fund.
  1. Invest in stocks.

Every dollar you have has the potential to work for you and earn you more dollars, and with sound investments, Black families can take advantage of this and build generational wealth. The best option is to invest in stocks, but according to ABC News, by not doing so, Black people have “missed out on the approximately 260% returns for S&P 500 funds over the last decade and the resulting chance to see their wealth grow.” 

However, it’s never too late to start investing. One of the easiest ways to get started is by depositing money into an online investment account like Acorns, with which you can purchase shares of stocks or stock mutual funds in the future. Take some time to learn about the stock market and plan your investments with your financial advisor.

  1. Own your home.

According to the Census Bureau, only 44 percent of Black families owned their homes, compared with 73.7 percent of white families. This is unfortunate because homeownership generally generates positive financial returns that increase net worth and lay the groundwork for generational wealth, family stability, and financial security.

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Source: Pexels

So, as you start saving and planning your investments, also consider buying a home. You could as well purchase a property and rent it out to tenants. As the property appreciates over time, you either make money from your tenants or have them pay the monthly mortgage on that property, acting as an eventual stream of passive income.

  1. Establish a family business.

Although entrepreneurship fosters economic growth and offers low-income families a way to become middle-class, black entrepreneurs face a different fate due to systemic biases in the US. However, by establishing a family business, Black families can increase their income, avoid workplace bias, employ family members, and have a business to pass down to the next generation. 

You can start small with something you’re passionate about and willing to invest your time in, then build a solid transition plan to educate your children about the business, your industry, and entrepreneurship to ensure they’re actively involved in the business as they grow.

Final Thoughts

There’s no singular solution to the effects of slavery, discrimination, and biases on the financial well-being of black people. However, with these strategies, Black families can create a better life, shape their future, and achieve the financial freedom that has long been out of reach.

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