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When it comes to building wealth, many Black Americans are facing an uphill battle.
The median annual wage for Black workers is about 30% lower than that of white workers, according to a McKinsey & Company report. The report also found that 3.5 million of the country’s Black households have a negative net worth due to debt.
“Oftentimes, the issue with savings and wealth building is that folks don’t make enough money,” said report co-author Shelley Stewart III, who leads McKinsey’s research on Black economic mobility in the U.S.
“We need to address that as a broader society, typically with communities of color.”
In addition, Black households generally start with less family wealth. McKinsey estimated a $330 billion disparity between Black and white families in the annual flow of new wealth, with 60% of that coming from inheritances.
Because of that lack of generational wealth, Black families tend not to be exposed to investing, said certified financial planner Kamila Elliott, president of Grid 202 Partners, a financial advisory firm based in Washington, D.C.
The price of that gap can be huge. In 2064, the average white family likely will possess $2,782,727 in wealth while the Black family wealth will be $789,164, a report by Elliott and Abacus Wealth Partners CEO Brent Kessel found. That’s a 70% disparity.
While societal changes are needed to address the racial wealth gap, there are also steps Black Americans can take right now to start building wealth, experts say.
Talk about it
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The most important thing to do is to start saving, even if it is just a small amount every month.
Almost three-quarters, or 73%, of Black adults do not have enough emergency savings to cover three months of expenses, an April 2020 Pew Research Center survey found.
Once you build up that emergency fund, you can put money into assets that could give you a higher return, like the stock market.
“If you save more, it gives you more flexibility to take more risks and do more things that could bode well for your future down the line,” Saporu said. The son of Nigerian immigrants, Saporu was a dedicated saver, which enabled him to start his firm a year out of business school.
Buy a home
As you accumulate more savings and start to think about how you can invest, consider buying a house. It’s not only a place to live, it’s also an investment.
There is also the possibility to continue investing in real estate, like buying a home or …….