The State of the African-American Consumer Report says black folks’ buying power in America is expected to reach $1.1 trillion this year. $1.1 trillion. If Black America were its own nation, it would be the 16th largest economy worldwide.
Despite our current and projected economic prowess and potential, we still continue to lag far behind our white counterparts when it comes to building generational wealth, which by definition is an aspect of financial planning that is geared toward passing down stable, significant financial resources to future generations.
The February 2013 Research and Policy Brief by the Institute on Assets and Social Policy titled “The Roots of The Widening Racial Wealth Gap: Explaining the Black-White Economic Divide” points the finger at systemic, white supremacist institutional policies as the key culprits in blacks inability to close the wealth gap on the one hand, and implicitly, Black people’s struggle to pass on generational wealth.
Looking at the same set of families over a 25-year period (1984 to 2009), the total wealth gap between white and African-American families nearly triples, increasing from $85,000 in 1984 to $236,500 in 2009. This study’s evidence found that policies and laws governing homeownership, work and increased earnings, employment stability, college education, and family financial support and inheritance created more wealth for whites than it did Blacks. Together, these fundamental factors account for nearly two-thirds (66 percent) of the proportional increase in the wealth gap.
But the discussion around the prevalence of the wealth gap and our collective inability to pass down generational wealth cannot be fully explained away by the realities of racist policies and systemic inequalities. We also have to examine how our collective spending habits contribute to it.
Reports like “Resilient, Receptive, and Relevant: The African-American Consumer” published by Nielsen in collaboration with the National Newspaper Publishers Association (NNPA) in 2013 expand the “wealth gap” discussion by highlighting the widespread spending habits and choices of blacks in America, alluding to the point that personal and collective money decisions definitely contribute to current Black-white wealth gap. The Nielsen report found the following statistics with respect to African American spending choices, habits, and trends:
- On average, Black households shop more frequently (eight trips more) than Total Market households and are more likely to frequent dollar stores (seven trips more), convenience stores (two trips more) and drug stores (one trip more), but spend an average of $8 less per trip.
- African-Americans are spending 30 percent more of their average annual household income at retail stores(13 percent) versus the Total Market (10 percent).
- While being receptive to trying new products, Blacks commit 18 percent of their annual retail dollars to store brands and continue to show resiliency in specific non-edible categories such as Ethnic Hair and Beauty Aids, where they are more likely to spend nine times more than other groups.
- Blacks read financial magazines 28 percent more than other consumers and spend an average of 87 minutes online looking at websites related to finance and investment, which is 12 percent higher than the overall market. However, African-Americans under index for most categories within the financial sector, particularly in purchasing common financial products such as mutual funds, first mortgages, and stocks, indicating a disconnect between curiosity and participation.
Similarly, according to Target Market News, a Chicago-based marketing research group, each year, African Americans spend more than $47 billion on Lincoln automobiles, $3.7 billion on alcohol, $2.5 billion on Toyotas, $2 billion on athletic shoes, and $600 million each year on McDonald’s and other fast foods.
Journalist Stacy M. Brown in her article, “Big Spenders, Small Investors: Blacks Have Little to Show for Hard-Earned Dollars” for The Washington Informer found research at the Brookings Institution in Northwest Washington, D.C, like some of the findings from the Nielsen report, that reveal that while many whites are comfortable investing in the stock market, most Blacks are not. Sixty percent of African Americans have less than $50,000 saved in company retirement plans and only 23 percent have more than $100,000.
According to the Harvest Institute, a Washington, DC-based think tank, income circulates with the Black community a zero to one time. On the other hand, income circulates unlimited times in the White community, at least 12 times amongst Jews, at least nine times with Asians, and at least six times in the Latino community. The implications of being big-time spenders, small-time investors ensures that our money does not stay in our community long enough to build and sustain structures to establish generational wealth.
Connect with Kara @frugalfeminista. Learn more about The Frugal Feminista at www.thefrugalfeminista.com Download her free ebook The 5-Day Financial Reset Plan: Eliminate Debt, Know Your Worth, and Heal Your Relationship with Money in Just 5 Days.