When it comes to paying bills, Black Americans are finding it extra hard to cover regular costs.
According to a new survey on financial literacy, about 40% of those individuals are struggling to make ends meet. The discovery is tied to statistics from the 2023 Personal Finance Index report, part of the latest index done annually by the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business.
The research showed some alarming findings including 24% of Black Americans reported decreased retirement savings and 13% stopped saving completely because of inflation. But they are not alone as the data included nearly identical percentages for workers overall experiencing similar problems.
Further, 32% of Black Americans report debt stopped them from adequately addressing other financial
priorities and bills, 27% say they certainly were unable to come up with $2,000 for an unexpected need, and 55% admitted not having one month of non-retirement savings. And financial literacy in areas such as saving, investing, purchasing, and comprehending risks among Blacks remained below 50%.In a bothersome finding, the survey showed financial literacy levels were lowest among Blacks at 34%, behind 55% for Asians, 53% for whites, and 38% for Hispanics.
“Every year we say the findings are troubling, but this year, more than ever, we see how low levels of financial literacy in a volatile economy can lead to problems,” said Annamaria Lusardi, the report’s co-author. “It’s important we focus on helping people of all ages, races, and genders, especially the ones who are the most vulnerable.”
Melissa Shaw, TIAA Wealth Management Advisor, shared with BLACK ENTERPRISE via email it’s very difficult to be financially secure if you’re not financially literate. She added one thing from the report that stands out is overall, compared to those with a very high level of financial literacy, those with a very low level of financial literacy are more than four times as likely to have stopped saving for retirement (18% vs. 4%).
She explained when somebody reduces how much they save for retirement, it may not be just a one-time cut. People should consider that if they scale back their retirement savings so that it’s less than what their employers will match, they’re leaving free money on the table.
For instance, she notes, let’s say
you make $55,000 a year, and your employer will match up to 3% of what you save. Your 3% would be $1,650, and it would spur another $1,650 from your employer. “The less you save, the less your employer will save for you.”“To be sure, the financial literacy gaps have nothing to do with capability. They’re more likely because of systemic factors and demographic differences, such as age, education, and income. And there’s been a lot of great work done by groups who serve those communities, and that should absolutely continue. One thing we should also emphasize is the importance of financial education programs in both schools and at work.”
Shaw says there are about 20 states that require students to take financial literacy classes, and that number has been growing. She adds that more employers should do more to help employees learn about paying their bills and their financial wellness before they reach the age of retirement.
“Just like companies offer medical benefits, financial wellness benefits should also be a given,” she explains.
Besides what’s being done in schools, at work and in communities, though, people should talk to their employers about different options for retirement savings and future bills.
“And talk to a financial advisor,” Shaw says. “No matter what stage of life you’re at–repaying student loans, buying a house, sending your kids to college–the financial advisors can help tailor a plan to help you achieve your short- and long-term goals.”
Check out more details, including the methodology, on the survey here.