The Impact of the Racial Wealth Gap on Black Families and How We Can Stop the Cycle

In 2016, it was found that the typical white family had a net worth nearly 10 times that of a Black family. But this isn’t recent - this persistent racial wealth gap has been disadvantaging Black families and communities for centuries. And now in 2020, it has been posited that the racial wealth gap is as wide now as it was in 1968 (source: The Washington Post).

What I've learned in the past few months is that while the Black-white wealth gap is multifaceted, the racial inequality in economics is ultimately rooted in America’s history of oppression, power imbalances, and unafforded opportunities.

A Brief History of the Black-White Wealth Gap

• 1619-1865: 246 years of slavery.
• 1874: Congressional mismanagement of Freedman's Savings Bank which left 6,144 depositors with lossed of nearly $3 million.
• 1921: The violent destruction of Black Wall Street (a thriving center for Black business and culture) known as the Greenwood district in Tulsa Oklahoma.
• Other discriminatory policies throughout the 20th century, including the Jim Crow Era’s “Black Codes” strictly limiting opportunity in many southern states and the New Deals discriminatory housing policies like redlining which didn't afford different ethnicities the same loans, mortgages, or payment plans.

Reflecting on the Racial Wealth Gap

It’s important to reflect how history relates to present day racial inequality because its legacy has been passed from generation to generation through unequal monetary inheritances, which make up a large portion of current wealth. Economists concluded that inheritances and other intergenerational transfers “account for more of the racial wealth gap than any demographic and socioeconomic indicators."

Almost 70 percent of middle-class Black children are likely to fall out of the middle class when they become adults (source: McKinsey). If we allow the racial wealth gap to continue widening, we will risk falling into a cycle that will be hard to pull out from, as our current system disadvantages Black families, individuals and communities by limiting their economic power and prospects.

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Supporting Black Wealth Through Meaningful Action

As a white woman and financial educator, it’s important for me to really take time to understand how current economic disparities came to be. Just because I haven't personally experienced racism, it isn't an excuse to remain complacent and not seek to understand the systems that have created it. We need to take action in order to help dismantle systems that abuse their power, end systemic racism, and find ways to ensure Black wealth thrives in the future.

Just like we need to work towards closing the Latina pay gap, we need to proactively look for ways to end racial inequality when it comes to Black wealth. The easiest way to do this is by using your hard-earned cash to consistently buy from Black-owned businesses. I also recently came across a great article by NerdWallet which has been an excellent resource for learning how to support Black wealth with our investment portfolios and banking options.

We have to start somewhere. Let's continue doing the anti-racism work not only in our day to day life, but within our finances, too.