Inequality in the savings race

‘In the Black’ shows how to overcome financial obstacles

 

 

CAREERS AND WEALTH. Any financial advisor will tell you that investing now is the most crucial thing you can do to make sure you have a satisfying and comfortable future.

But there is a great divide between the races in saving for retirement. According to a recent study by Ariel Capital and Charles Schwab, 62 percent of black households earning more than $50,000 a year own stocks and mutual funds, compared to 82 percent of white homes of equal economic status.

This disparity doesn’t have to continue, says financial planner Aaron W. Smith. As he points out in his new book “In the Black: Live Faithfully, Prosper Financially” (Amistad, $16), African-Americans do not need to feel like the underdog — by 2012, black buying power is expected to reach 1.1 trillion, according to the Nelson Company. They just need to become more informed about their financial options.

“I work with both white and black clients,” Smith tells us over the phone from his office in Virginia. “And let me tell you, both [races] are not financially literate. But the difference is that whites have a tendency to save more. And we traditionally tend to spend what we earn — not to mention the problems in the gap in income.”

In addition to that gap, there are many more obstacles when it comes to African-Americans and saving — more than 50 percent of black women are raising children in a household where a father is absent, meaning money is tighter. And as “In the Black” points out, there’s also a long-standing tradition of loaning extra money to family members instead of socking it away, and there’s a tendency to rely on Social Security or pensions as their primary retirement savings vehicle. 

But Smith knows that African-Americans can overcome a historical resistance to investing and create wealth; they just need to know what opportunities are available.
“Absolutely,” he states unequivocally when asked if the gap between races can be narrowed in terms of saving. 

“No one ever thought that the leader of the free world would be a black man. We as African-Americans are powerful. Anyone can achieve their financial dreams — nothing is impossible, it just takes a little bit of learning and understanding.”