February 2022: Financial Literacy and Race 

Financial Literacy and Race 

Young people are already disadvantaged by a lack of knowledge when it comes to making financially literate decisions. Although financial literacy is critical to setting yourself up for success in the future, personal finance is not present in the curriculums of many U.S. schools. According to Next Gen’s Personal Finance 2022 Report, 1 in 4 high school students will take a personal finance course before graduation. Although this number is on the rise, it still leaves 75% of students to rely on their parents and relatives to learn the ropes in the financial sphere (and that doesn’t consider the larger number of recent high school graduates who were never offered a course in personal finance).  

The glaring problem with young people learning personal finance from their social circles is misinformation. How does one rely on adults to properly educate them on personal finance if the adults themselves also struggle to make financially sound decisions? Many people get caught in the same cycles of debt as their parents because no one has taught them otherwise. It doesn’t help that many loan servicers and credit card companies prey on their customer’s lack of knowledge with incredibly high-interest rates and fees.  

Although these problems affect many Americans, they are magnified for marginalized groups for whom systems have worked against for decades. Levels of financial literacy among Black and Hispanic Americans are lower than White and Asian Americans. This is at the forefront of an ongoing problem in the United States referred to as the racial gap in financial literacy. 

According to a 2018 national study conducted by FINRA (Financial Industry Regulatory Authority), Asian and White Americans answered an average of 3.2 out of six questions correctly in an assessment of basic of financial literacy. Hispanic Americans correctly answered 2.6, and Black Americans correctly answered 2.3.   

The same survey suggests that household income and education are the two primary indicators of financial literacy, and there is a significant racial wealth gap within the United States. A 2015 Pew Charitable Trusts report concluded that “that the racial wealth gap has more to do with a lack of assets for Black and Latino families than racial variation in debt or an abundance of debt… evidence suggests that inheritance and other intergenerational wealth transfers benefit Whites to a much larger extent.” The same report found that income among White Americans is higher than Black Americans, regardless of education level. It stated: “Black families whose head earned a college degree is only about two-thirds of the median wealth of White families whose head dropped out of high school.” With household income being a primary factor in determining a person’s level of financial literacy, Black Americans are bound to fall behind due to the social and political barriers that perpetually disvalue  

Although saying that financial literacy is a problem for all Americans is true, it is a statement that overshadows the unique challenges of the many groups who fall under the category “American”. Acknowledging the different barriers that Black Americans face in becoming financially literate is a crucial step in remedying the problem.  

The race gap in financial literacy is a topic that cannot be properly covered in a short blog post. If you would like to learn more about the race gap and how to challenge it, I am linking a few articles that can further your research and understanding.  


In honor of Black History Month, we are focusing on topics related to Black Americans and personal finance. Throughout the month of February, we will be publishing blog articles weekly covering financial literacy and the Black experience in America.  


More Articles: 

Tackling Disparities in Finance for Black and African Americans 

The Racial Gap in Financial Literacy 

Financial Literacy in the Black Community