Building Generational Wealth in Minority Communities

It is no secret that wealth disparities have disproportionately affected minority communities in the United States for centuries, influenced by historical racist systems and a lack of access to resources. With redlining practices, racial segregation, lack of access to education, and stagnating minimum wages, among other things, there have been many factors working against people of color and their ability to build wealth. There are also cultural barriers that play an important role in the ability of minority groups to accumulate wealth. For these reasons, people of color often must work harder and be more intentional in building generational wealth.

Normalize Money Conversations

Culturally, for many communities of color, it is considered taboo to talk about money. Bringing up this subject can be considered rude, and sometimes there can be a sense of shame when one has not had access to wealth. This stigma hurts our people and is something that, as a community, we need to change. Growing up, my family never discussed finances. Sure, I would hear the occasional, “Hey, make sure you save your money”, but we never had conversations about the importance of personal finance. Later, when I worked as a banker, I had a front-row seat observing this from a different perspective. It was very common for Caucasian parents and their children to visit the bank together and even sit through the account opening process while the parents explained what was being discussed along the way. They were there to advocate and guide their child in making educated decisions that would work in their favor. Parents would often provide advice about topics such as overdraft protection, savings accounts, and credit card usage. For people of color, it is important that we normalize these conversations and educate our children in personal finance from the start to create a strong foundation they can build on.

Understanding and Building Your Credit Score

While working in the banking industry, I developed a passion and interest in personal finance. I began to understand how all our own personal financial decisions are intertwined with our success and ability to build wealth. Something as simple as successfully maintaining a monthly budget could result in developing healthy spending habits, higher savings, and lower debt. This can help build a higher credit score. A credit score is a prediction of how likely you are to pay a loan back on time based on information from your credit reports. The importance of maintaining a good credit score shouldn’t be diminished, as it can make access to credit and loans more affordable. There are many ways to monitor your credit to track your progress so there are no surprises. Our financial wellness partners, Your Money Line, can help you figure out how to track your credit, build a budget, and more. You can contact a Your Money Line Financial Guide today by visiting our Your Money Line page.

When the time comes to purchase a home, the better our credit score is, the better the available interest rate will be on our mortgage. Research conducted by Habitat for Humanity highlights how homeownership can be a catalyst for wealth-building for low-income households and households of color. Their research states that being a homeowner “promotes wealth building by acting as a forced savings mechanism and through home value appreciation,” which then enables the homeowner to “realize greater proceeds if they sell the home.” It is also noted that children of homeowners are likely to become homeowners themselves earlier in life, which lengthens the period they accumulate wealth. This can help build intergenerational wealth and help close the gap in wealth disparities. The U.S. Department of Housing and Urban Development (HUD) has special programs in place to help first-time homebuyers make homeownership a reality and to assist current homeowners in keeping their homes. Click here to view HUD program information by state.

The Wage Gap and Savings

The wage gap in the United States continues to be an alarming and important factor in wealth disparities. According to an analysis conducted by the Economic Policy Institute, between 1980 and 2022, the bottom 90% of U.S. earners had wage growth of just 36% compared to 162% for the richest 1% and 301% for the top 0.1%. When it comes to saving for retirement, it is important to educate yourself about the retirement programs offered by your employer. Understanding these benefits, including any employer matching or contributions, can greatly enhance your savings potential. Even if employer contributions are not available, starting your own retirement savings through salary deductions is a wise move. Begin saving early and consistently, as this allows you to benefit from compounded interest, significantly contributing to your wealth-building efforts.

Pension Fund of the Christian Church is committed to offering equitable savings and retirement solutions to our members. For questions on how we can help you on the road to a strong, smart, and secure retirement, please connect with our Client Relations team by clicking here. If you are a Pension Fund member, be sure to check out Your Money Line, a free benefit with access to financial guides who can assist with your personal finance questions.