BLACK AMERICANS HOLD MUCH LESS WEALTH THAN OTHER AMERICANS
Washington, D.C., August 29, 2002 -- According to a new report
on black American wealth and financial behaviors, the typical black
household had less than one-quarter the net wealth of the typical
American household -- $15,500 vs. $71,700. This wealth gap is much
greater than the median income gap between black American households
and all American households -- $27,900 vs. $40,800 in 1999.
To help reduce this wealth gap, BET.com and the Consumer Federation of America (CFA) have launched a Black America Saves initiative to encourage and assist African Americans to save and build wealth. This initiative includes:
- Membership in a Black America Saves club in which those who submit a saving goal and plan become Black American Savers who receive free information about savings strategies and options, a free subscription to the American Saver newsletter, and free access to financial planners by phone or Internet;
- A Black America Saves subpage on the BET.com website, developed by CFA, which provides basic information about saving and wealth-building, allows the calculation of current and future household wealth, and permits enrollment as a Black American Saver; and
- A Black America Saves pamphlet, with information about savings and becoming a Black American Saver, that will be distributed to hundreds of thousands of black Americans by the two organizations.
"Our goal is to utilize the power of the Internet and the reach of the
BET network to provide black consumers with the tools to make informed
decisions about spending, savings, and building wealth," said Debra L.
Lee, President and COO of Black Entertainment Television (BET).
"The goal of Black America Saves is to augment existing efforts to close the considerable wealth gap between blacks and other Americans," said Stephen Brobeck, CFA Executive Director, and author of the report.
The report also found striking differences in the self-reported financial behaviors of black Americans and other Americans. However, it also concluded that these behavioral differences can be accounted for almost entirely by differences in wealth.
Black Household Wealth Low But Increasing
The report prepared by CFA's Brobeck draws from Professor Catherine Montalto's analysis of the most recent Federal Reserve data on household finances. Montalto is a Professor of Family Economics at Ohio State University. The 1998 survey of Consumer Finances includes data on a sample of more than 4000 households.
As well as the bad news about the huge wealth gap between black American households and other households, the report revealed the good news that black American wealth has been growing rapidly over the past decade -- from $3,680 in 1989 to $15,500 in 1998, an increase of 321 percent.
In terms of wealth levels, the report also found that:
- Proportionately fewer black than other Americans are wealthy. Only 18 percent of black American households, but 42 of all American households held net wealth of at least $100,000.
- Conversely, proportionately more blacks than others are "wealth-poor." Forty-five percent of black households, but only 25 percent of all households, held less than $10,000 in net wealth.
Black Financial Behaviors Differ From Those of Other Americans
The Fed survey also revealed significant differences in self-reported financial behaviors related to planning horizons, spending and income, savings habits, and willingness to take financial risks.
Thirty-five percent of black Americans have a "planning horizon" of the next few months (compared to only 20 percent of all Americans). Moreover, only 25 percent of black Americans have a planning horizon of at least five years (compared to 38 percent of all Americans).
In relation to spending and income, 24 percent of black Americans report that they spend more than their income (compared to 14 percent of all Americans). Moreover, 37 percent of black Americans spend less than their income (compared to 56 percent of all Americans).
Regarding savings, 32 percent of black Americans say they do not save (compared to 23 percent of all Americans). And 34 percent save regularly (compared to 39 percent of all Americans).
Behavioral Differences Explained Largely by Wealth Differences
The differences in financial behaviors between black Americans and all other Americans raise the question as to whether there are not unique behaviors exhibited by black Americans that help explain their low wealth levels. However, when differences in wealth are accounted for, these behavioral differences virtually disappear. (The comparison in financial behaviors was made among black and all American households with net wealth under $10,000 -- 45 percent of black households and 25 percent of all households.)
Thirty-four percent of the black low-wealth households, and 32 percent of all low-wealth American households, had a planning horizon of the next few months. And, 19 percent of these black households, and 23 of these U.S. households, had a planning horizon of at least five years.
In terms of saving, 39 percent of the black low-wealth households, and 41 percent of all U.S. low-wealth households, did not save. And, 21 percent of these black households, and 22 percent of all these U.S. households, saved regularly.
This finding suggests that it is wealth levels, rather than racial difference, that helps to explain differences in financial behaviors between black Americans and other Americans. The report suggests that other factors -- such as differences in income, family inheritance, and contributions to dependents -- help explain relatively low black household wealth levels.
Black America Saves Is Part of America Saves
The new Black America Saves initiative is part of a larger American Saves campaign that was launched early in 2001. The campaign's major focus is supporting local campaigns that are being organized or have launched in nearly 20 local or regional areas. These campaigns typically seek to enroll Savers through motivational workshops and one-on-one wealth coaching. Cleveland Saves, the campaign's Ford Foundation-funded demonstration project, has enrolled more than 2000 Cleveland Savers and involved more than 100 non-profit, government, and business organizations in the initiative.
Bank of America Foundation grants have allowed CFA to support the development of local savings campaigns. The latest grant also funded CFA's development of the Black America Saves website, pamphlet, and Saver services. "Bank of America is proud to partner with consumer groups such as CFA to raise the level of financial literacy among American consumers," said Percy Simpson, Consumer Segment Marketing executive. "The economic health of our nation is dependent on the financial stability of Americans. We must achieve this stability through savings and financial planning, other wise, there is the potential to alter the economy and hinder the progress of businesses and individuals. Through programs such as America Saves and Black America Saves, Bank of America along with CFA and BET.com are continuing their commitment to lowering the wealth gap among all Americans."
The Black America Saves initiative began as a website subpage that BET.com asked CFA to develop and link to America Saves. Despite modest publicity, this subpage has been receiving tens of thousands of "hits" for each of the past several months. BET.com also has an Owning a Home channel which provides members with help in the home ownership process, including the ability to apply for a mortgage online.
NAACP and National Urban League Support Black America Saves
The two most prominent and influential African American organizations, the NAACP and the National Urban League, have pledged their support to the Black America Saves initiative.
Said National Urban League President Hugh Price: "The National Urban League recognizes wealth building as a key component in our strategy of encouraging economic self-sufficiency. Our current housing and community economic development strategies that include home ownership, housing development, business development, and financial literacy are critical to empowering African-Americans to move into the economic mainstream. We view Black America Saves as another important tool in our work to rebuild our communities by strengthening family net-worth through savings. Therefore, we are pleased to join with Bank of America, BET.com, the Consumer Federation of America, and the NAACP in this important national effort."
Said NAACP President Kweisi Mfume: "For the past several years, the NAACP's Financial Empowerment Initiative has worked to build wealth in both urban and rural communities by focusing on personal investing, business development, home ownership, and financial literacy. The Black America Saves program, developed by the Consumer Federation of America, will help impact the wealth gap by encouraging even more people to set financial goals and save for the future, thus increasing the financial stability of families. We congratulate our long-time partner, Bank of America, for their unqualified support of this initiative and we are pleased to join with the National Urban League, BET.com, and the Consumer Federation of America in supporting the Black America Saves program."
BET, a subsidiary of Viacom, is the nation's leading television network providing entertainment, music, news, and public affairs programming for the African-American audience. Its branded businesses include BET.com, BET Digital Networks, BET Uptown, and BET Books.
CFA is a non-profit association of 300 pro-consumer groups that was founded in 1968 to advance the consumer interest through research, education, and advocacy.
CONTACT: Jack Gillis, CFA, 202-737-0766, or Retha Hill, BET.Com, 202-533-1914.