If there’s anything that’s more evident amongst my friend groups and acquaintances alike it’s that we are all eager, thirsty and ready to start building wealth in one way or another. We all have the knowledge, the education, the support systems, and resources to do so right? Well… while building wealth involves learning how compound interests and loans work there’s also another element and that is the racial wealth gap. A gap that’s only growing larger in size each year.
Before we really get into this, Let’s look at some numbers for a second. If you take the average white family in America … total their savings and their assets and then subtract their debt you would be left with $171,000. Now, if you did the same for the average black family assets + savings – debts you’re left with $17,900. Yup thats rights, let’s take a look at those numbers again.
Average White Family Assets + Savings – Debts = $171,000
Average Minority Family Assets + Savings – Debts = $17,900
If you’re looking at these numbers and laughing good because I am too. Turns out however jokes on us because these numbers are us.
Recently I traveled down to DC with a brand called Shinehard Family created by not only someone I really look up to but by someone who I’m lucky to call my family – Johnny Bailey. His mission for his brand is to close the wealth gap through various online mentorships and seminars. In his partnership with Google, I was inspired to write my own piece. So what exactly does all this gap talk mean for us?
It means we’re already centuries of wealth building behind. It means a major deficit in the amount of time it will take to build wealth and the amount of wealth we as minorities can build. With round one of the presidential debates done and minority education at an all time high, it’s important that we all know our past and stay up to date with our futures. So keep reading for a digestible list of things you need to know about the racial wealth gap in America and how it affects our future.
1. Special Field Order 15.
After the civil war ended, Lincoln called 20 black leaders together and asked them what would they need to rebuild the country and take care of themselves. Land they replied They needed Land. On March 2nd 1865 – 2 days before his second inauguration, President Lincoln signed Special Field Order 15. An order that stated each freed slave would receive property and 40 acres of land in America. Finally things were looking up and America was almost a very different country. 2 weeks later Lincoln was assassinated and Andrew Johnson, Lincoln’s predecessor, reversed the bill. He claimed it was discrimination against whites and that the bill posed a threat to whites wealth as well as the economy. Slaves were only building wealth in America for 246 years, but they WERE wealth in America accounting for 8.3 millions dollars in value. Wealth that whites now got to keep.
Thousands of formerly enslaved Americans were evicted form their homes and forced to live in “designated” areas. Hence the birth of segregation and to our modern day ghettos.
2. The Gap is Enforced through Federal Policies
Part of the reason why the gap still exists is through federal policies that would only provide sub prime mortgage loans to black families. A subprime loan is a loan that has high interests rates and only gets more expensive as time passes. Lenders like Wells Fargo would target black churches and minority groups and hold “wealth building seminars” to offer them the dream of a home, to build wealth, and get a piece of the American dream meanwhile they were only selling them these types of loans. While subprime loans were only supposed to be for high risk , low credit borrowers, 1 in 5 black families with a perfect credit score would still only be eligible to receive a subprime mortgage loan. This means that during the recession, black communities lost 52% of their wealth while whites only lost 16%
3. In this century.. Any wealth gathered is and will be through property And Home Ownership
With that said, property values decreased where black were allowed to move in. Federally enforced segregation became a way of life and as mentioned above black families were excluded from home ownership which all affected
- The jobs they could access
- Where their children went to school
- How safe they were
- And whether or not their home increased in value (most times it did not)
In 1968 housing discrimination was outlawed but this was too little too late. 100 years of discrimination since slavery ended already left a huge space in the home ownership gap.
4. Education has little to do with solving the problem
Graduating from college is great but it’s proven that a formal education would have very little affect on closing the gap. That’s because most blacks and minorities have to go into debt in order to receive an education.
On Average a white college student’s wealth increases overtime while a black college student’s wealth decreases. Why? It’s in how moneys spent. Its likely that a black college graduate is a first generation graduate and is the most successful in their family. Therefore the family leans on them for support, and they give it while the average white family already has the foundation and can continue to extend it to their children. So while an education is still the answer, it’s a very small part of the resolution.
5. Investing long term is the solution
If you were to take $100 and invest it in 1865 that same $100 would be worth 3.5 million in 2019. While that opportunity has come and gone, it’s important that we all start to understand the value of compounding interests and investing long term. Blacks and Minorities make up the highest consumer group yet we’re still only left with $17,900 (if that) after we subtract our debts from our savings and assets. While I’m still very new to this game, it is proven that wealth generates overtime and if we want to close this gap, we have to start working together now.
In closing, most of us are entrepreneurs, enlightened, eager and educated. Not only ambitious in our passions but want to get ahead of the game in terms of financial literacy. But we can’t do that without knowing our history first. While this is just a brief overview, it’s important to understand that wealth is where past injustices breed modern suffering and the racial wealth gap is a testament to that. It shows we still have a long way to go for equality in this country.
As always thank you so much for reading and spending a part of your day with me. Until Next time! All photos are captured by @cornerstonecaptures for The Shinehard family LLC
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