The Black Dollar II: The Pulse Of Paper
When I wrote the Black Dollar - Matters, Money and Movement, we were in the middle of George Floyd and Black Squares. Within that article, I called out some interesting statistics about the culture that showed that the coints were moving slow within the community. Many posts about closing the wealth gap have been popping up, but not too many checked the pulse to see how the money was moving within that gap. That’s what I wanted to do when I saw the new 2020 Ariel-Schwab Black Investor Survey.
I look forward to reading this survey annually and was able to sit in on the review of it this year via the webinar. One of the biggest take aways of this pandemic has been The Great Reset that Rona Mae Jenkins has done. Per the study and webinar, “The pandemic has further exposed fault lines between the fortunes of middle-class Black and white Americans.”
What this survey does is expand upon how Black people are investing. This survey was conducted at the end of 2020 in collaboration of two asset management companies - Ariel Investments, LLC and Charles Schwab. Mellody Hobson heads up Ariel Investments and she has been one of the driving forces on not only hearing the statistics of the study, but changing the narrative of the story.
Some of the areas in which this study looks into are:
Black Investors + Stock Market
The Golden Ages: Retirement funds
Invest Black Continues -
In this article, the core of it was based around investing while Black. Regardless of what social media says, African American participation in the stock market stands at its lowest level in the history of the survey. As you know, one of my foundational topics on this platform is getting more of the Culture to invest in the stock market. Here’s the opening stat from the study that sets it all off - 55% of Black Americans and 71% of white Americans reporting stock market investments. The gap we see within the Culture just isn’t left to making wealth, but seeing it within one of the biggest wealth transfers there is.
63% of Black Americans under the age of 40 now participate in the stock market, equal to their white counterparts. The boom of the information age of social media is allowing younger demographics to learn about investing and jump right in. Swipe and Snatch makes investing even easier vs what older demographics have experienced. Twenty-nine percent of Black investors under the age of 40 were new to investing in 2020 compared to 16 percent of whites. And within that regard, 49% of Black Americans are the 1st in their family to invest (compared to 39%).
Why is that? Because that demographic finds it easier to talk about investing. That makes it 18% of Black Americans < age 40 vs. 7% of those age 40+.
The Golden Ages: Retirement Funds -
Statistics are usually the grabber when it comes to people and this one from the first Black Dollar was no different:
When it comes to retirement accounts, 65% of white families have a 401(k), individual retirement account or another similar plan, according to the Fed. The figure is just 44% for Black families and 28% for Hispanic families.
Fast forward to this study -- 63% of Black investors find themselves participating in the stock market through their retirement plan, equal to their white counterparts according to this new study. That’s where most investors are introduced to investing and learning about different funds.
When it comes to types of accounts that Black people 53% were likely to have a Defined Contribution Plan (401(K), 403(B) plans) compared to other plans like IRA (35%). But when it comes to contributing to those funds, Blacks contributed less than others. White 401(K) plan participants put 26% more per month toward their retirement accounts than Black 401(K) plan participants ($291 vs. $231). This is a mixed bag when it comes to investors. For some it could be due how much they make and how many ways their paycheck stretches.
In the CARES Act, the Government allowed for Americans to withdraw from their retirement without penalty up to $100K. Many took care advantage of that and this study called that out. More than twice as many Black 401(K) participants (12% vs. 5%) borrowed money from their retirement accounts. This number was comparable to emergency funds - nearly twice as many Black Americans (18% vs. 10%) dipped into an emergency fund. We were quicker to tap into our emergency funds vs retirement plans; which is a good thing.
My thoughts --
I’m here for this survey every year and look forward to it. I just wish that it gave more context around mindset and how people feel about Money. Both are important to how we make and make decisions around it. More Black people are taking their money more seriously making it for work for them. And one of the ways that they are doing it is through investing. Apps like Instagram and how dare I say, Robinhood are making it easier to invest. Stacks and strategy go hand and hand when it comes to investing. Both can be seen as a hurdle to those who wish to invest and want to invest for the long-term. Some people don’t have enough stacks (figurative speech) to invest and others don’t have the strategy to invest. How much money we have to manage with our paycheck is more of an issue than the money management concept that people are focused on.
As Black investors, when we get not only what is owed to us by our employers along with understanding coint strategy - all will align. The statistics give us a strategy for making the most out of investing when and how we can. From ETFs, Fractional Shares and REITs we can start to see the light.
Another thing is for folks to see the foundation of why a retirement plan can be passive income down the line. Looking into what funds are within that plan along with matching (if applicable) employer contributions. Scaling to match doesn’t make you less of an investor vs those who are able to do so out the gate.
One of the things that I found interesting about this study was how Blacks found lack of trust in financial institutions the reason why they aren’t able to make financial strides. From The aftermath of Black Wall Street to Wells Fargo to Robinhood, we simply don’t trust when it comes to finances. Those instances show how the hand of some can hurt the lives of many.
When it comes to wealth transfers - Black Americans are less likely too have a will, generational financial plans or even retirement plans. Roughly 23% Blacks inherited wealth. This is the portion that leaves us at a disadvantage for transferring wealth to generations to come after us.
The wage gap isn’t something to rave about, but what we are doing within the gap is what is going to be what helps close it. Continuing to shift what we are doing in the gap is based upon taking the pulse of The Culture routinely.
