New Study Clarifies Why African Americans Are Handicapped In Wealth-Building

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May 27, 2013 ‐ By Kimberly Gedeon

It’s all a vicious cycle. In order to get yourself a career, you need a degree. To acquire this degree, you need to go to college. College is ridiculously expensive so you are neck-deep in student loans. You assume this will all pay off in your future; your education will lead to a comfortable, wealthy life. A study conducted by Prudential Financial reveals that those very student loans that helped you attain your degree, along with other factors, will actually hinder your wealth-building.

Disheartening, but not surprising, the survey reports that college-educated African-American students are twice as likely to have student debt compared to the general population. Many African Americans are pleased to hold an expensive degree at graduation, but will have a difficult time saving or investing in their future.

The study also reveals that African Americans dislike risky business. They are half as likely as the rest of the population to possess investment products such as mutual funds, stocks, bonds and IRAs. Most blacks own life insurance and disability insurance where there is more stability and security for their future.

This study also infers that the selflessness and altruism of African Americans may also contribute to the sluggish growth of black wealth. And managing family priorities like making saving for a child’s education or leaving an adequate amount for inheritance can put a strain on one’s finances.

Finally, households with two or more generations are much more common among African-Americans. So, African-American workers find themselves financially supporting more family members when compared to other races. Some black breadwinners just do not have disposable income for their enjoyment or to save for the future.

Interestingly, the study uses the term “sandwich generation” which involves those who are supporting both their own children and their parents; this is common in the African-American community.

Despite the bleak outlook, the survey shows that African Americans are more confident and self-assured in having a better economic future than non-blacks. While the rest of the general population is focused on labeling asset accumulation as “wealth,” African Americans view life insurance, low debt, and covering health costs as financial confidence.

The underlying message of the study is that student loans keep African Americans from progressing up the money ladder, we love stability, and our families are our top priority.

For this March 2013 survey, 1,153 African-Americans participated in the study.

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  • texastea

    Wow. Colleges are becoming like shady banks now, issuing predatory loans. The way the job market is, the stagnation in wages, you will never be able to pay off that debt and live and survive and raise a family at the same time. I always say blacks really need to take a cue from the foreigners and other brown people that come over here and make it. We need to learn how to live together and invest together. We need to put our monies together to ensure that our kids can get thru college without that mountain of debt waiting for them at the end. We also need to not forget about those good paying blue collar professions that won’t require us to go into so much debt to get the training necessary for them. I am not even sure how worth it college is anymore. I think now even a master’s seems to be losing its “oompff” or impact. You should be able to get what you need in terms of impact and job leverage with a four year degree. You really don’t need an upper level graduate degree unless you are going into a highly specialized field like medicine, law, etc. Also blacks need to really learn about money and wealth growth. I recommend that all black college students minor in something that has to do with money or finance so we can learn about what is out there and what to do with our money once we get it. Oh yeah, and blacks don’t take as much risk with money because we have so little money to risk losing. And a lot of times we are afraid to risk leaving jobs that may be deemed more secure for other ones that may not be even though we may stand to make a little bit more money for a period of time.