Studies reveal a racial wealth gap in financial literacy

Realizing financial literacy is an important part of wealth-building or even functioning in today’s world, but its fundamentals have failed to be passed along equally to all Americans.

Achieving the American Dream – opportunities to succeed, put food on the table for one’s family, education for children, hope for a better life, freedom of opportunity – demands and requires capital and consistent investment. In the U.S., however, access to capital for individuals and small business owners has been largely dependent on race. It’s an ugly reality – a reality many wish not to confront – that there exists a significant racial wealth gap. As recently as 2019, the median net worth of your standard white household, $188,200, was 7.8 times greater than that of a typical Black household, $24,100, according to the Federal Reserve.

In an analysis report by the Brookings Institution published in 2021, the report found that Black and Latino or Hispanic individuals are more likely than white consumers to depend on high-interest financial services like check cashing businesses and predatory payday lenders because there are fewer mainstream financial institutions in those Black and Latino or Hispanic communities. Increasing access to branch locations or banking services could save Black communities up to $40,000 over their individual lifetimes, according to Reuters.

Now add the constantly growing state of consumer-centric digital financial tools like QCash’s digital Life Event lending solutions to the mix. As it stands, 22 percent of Black adults who are not digitally literate is double the percentage of white adults. Both the disparity in access to financial institutions and, hence, financial literacy, in one’s community or region threatens their ability to grow financial literacy skills and wealth in this ever-developing digital economy.

 

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