'Can’t ignore the racial disparities:' Black Americans' net worth is one-seventh of whites
From paying for college to applying for a credit card to securing a job with a high salary, Black Americans face many financial hurdles to building wealth.
The result? Their net worth lags that of white Americans.
Read more: Here’s what traditional money advice is missing on race
The median net worth of Black families is $142,330 — or just one-seventh of the $980,550 in wealth accumulated by white Americans, according to a new study from LendingTree that draws on data from the Bureau of Labor Statistics, the 2020 Economic Policy Institute report, and various Federal Reserve reports. The difference can have long-lasting impacts.
“You can’t ignore the continued racial disparities that affect almost every aspect of wealth creation,” said Vicki Bogan, an associate professor at Cornell University.
'Financial effects of race'
Black Americans considerably trail whites in other money markers like median income and access to credit, the study found.
“Despite financial advancements, Black Americans are still seeing less economic prosperity than the nation as a whole,” said Erika Giovanetti, LendingTree’s personal loans and debt writer. “What we found was pretty alarming only because the data is really compelling and you just can't argue with it.”
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Beginning with financing an education, Black undergraduates start their adult lives several paces behind, carrying $36,919 in student loan debt, 20% greater than the $30,731 borrowed by white undergraduates.
From there, the divide widens. The median income for U.S. Black households sits at $45,438, or 37% lower than the $72,204 for white households. Since 1970, the spread has only tightened seven percentage points.
“This really goes to prove that the financial effects of race in this country are still continuing to roll over across the generations as time goes by,” Giovanetti said.
'Creates a cycle of disparities'
Securing credit is also an obstacle for Black Americans whose requests are denied more often — 44% of Black applicants are rejected compared with 19% of white applicants — or they are extended less credit than requested — 57% of Black applicants were denied or approved for less than requested, compared with 24% of white applicants.
“With a lower household income, that can affect your financial security and impacts all your opportunities throughout life,” she said. “It really creates a cycle of disparities that goes beyond just the financial effects.”
Read more: Career coaches break down the challenges Black job applicants face
Longstanding discrimination and inequalities are to blame, Bogan said, not economic principles or “consequences of natural market processes.” Those financial headwinds that non-white Americans have faced must be addressed and corrected.
Otherwise, “we lose a little of our humanity as individuals and our moral high ground,” Bogan said.
Building wealth in marginalized communities that have been given fewer opportunities starts with “recognizing that this is a valid issue and not politicizing it,” Giovanetti said. From there, legislation can begin to lift up communities of color like improving public school funding, helping minorities achieve homeownership, and funding Black entrepreneurs.
“Without that access and opportunity,” Giovanetti said, “I would expect to keep seeing these racial gaps increase if we can't do something to make sure that we can raise everybody up and help Black Americans achieve the same economic prosperity as their peers.”
Stephanie is a reporter for Yahoo Money and Cashay, a new personal finance website. Follow her on Twitter @SJAsymkos.
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