The urgent imperative for businesses to promote financial literacy in communities of color

Illustration by Luisa Jung

In 2021, Noir purchasing power is estimated to be around $ 1.5 trillion, making it the focus of researchers, marketers, advertisers, and other campaigns designed to influence black spending habits. This year alone, Thanksgiving Day saw sales of around $ 5.1 billion and Black Friday saw $ 9.6 billion, which allowed the black community to play a very important role. With such a large revenue base for business, one might ask, where would the US economy be without the essential support of the black community and other communities of color? This rhetoric should and must inspire senior executives to advocate now for the development of an intentional long-term strategy. Working in partnership with NGOs and local and federal leaders, companies must intentionally create and create a long-term strategy to manage more resources for disadvantaged communities of color. This is essential not because it is good public relations or as a type of corporate sponsorship, but because it determines outcomes and creates an ecosystem of best business practices for entrepreneurs, small businesses and others. the economy in general.

As a corollary, the introduction of financial literacy and mentoring programs in disadvantaged communities also serves to instill, inspire and promote more economic prosperity and awareness. Financial literacy coupled with knowledge about investing in racial stocks – an investment strategy that seeks to advance racial equity while generating financial returns has powerful catalytic potential to promote more entrepreneurship, business ownership and ultimately helps revitalize socio-economically marginalized communities. Historical The data has shown that if administered properly, the impact of these resources produces a multiplier effect and enables better access to credit, creates more intergenerational wealth, but more importantly, creates a resilient ecosystem for small businesses to thrive and support each other.

The current state of the socio-economic divide using a racial lens

According to Institute of Political Studies, “While households of color are expected to reach majority status by 2043, if the racial wealth gap is not resolved, the median wealth of black households is on track to reach zero by 2053 and the median wealth of Latino households is expected to reach zero twenty years later. In contrast, the median wealth of white households would climb to $ 137,000 by 2053. ”It is extremely important to note that when businesses pledges and not acting on it destroys trust and credibility and there has to be more accountability. In the wake of the unprecedented protests that took place after the death of George Floyd America’s 50th largest audience companies and their foundations have collectively pledged at least $ 49.5 billion since May 2020 to tackle racial inequality. However, a Washington Post analysis found that “more than 90% of that amount – $ 45.2 billion – is allocated as loans or investments that they could benefit from, more than half as loans. mortgage. Even more blatant is the fact that while $ 4.2 billion of the total pledged is in the form of grants, companies have reported only a small fraction – around $ 70 million – go organizations with a specific focus on criminal justice reform, the cause that sent millions to the streets to protest the murder of Floyd by a Minneapolis policeman.

A Report on American Financial Literacy from Visual Capitalist

To properly educate and provide mentorship to communities, companies need to make a plan for what types of courses will be administered and which organizations would be best to lead them. There are different organizations such as Operation Hope, Money Think, CNFC, and many other nonprofits that work every day to bring a better understanding of financial literacy to underprivileged communities. Plus, taking financial literacy to the next level means investing in and supporting businesses of color. Rhythm Sewing provides expertise in music licensing and music solutions across all multimedia platforms. As co-owners of black-owned businesses, Kyle Hunter and Robert Ronci would like to reach a larger audience and with more support, financial knowledge and mentorship from businesses they could more effectively evolve their business model. current.

Financial literacy classes coupled with an investment in racial stocks and sustained long-term mentoring would significantly reduce debt and dramatically increase the ability of middle-income families to save and accumulate wealth. Studies showed that, on average, households earning $ 50,000 to $ 70,000 save only $ 1,000 per year. However, those who earn $ 70,000 to $ 90,000 save almost 10 times as much. Those who earn $ 100 to $ 150,000 save 20 times as much. Only a long-term sustainable strategy could finally begin to correct the inequitable wealth gap among disadvantaged communities.

Source: “Reducing income inequalities while stimulating economic growth: is it possible?” ”OECD, 2012.

Not only would this stimulate greater entrepreneurial innovation within communities of color, but it would also create more aware citizens who would have a better understanding of the creation of racial equity as well as property and thus be better economic stewards of the nation. their resources. Although the United States is the largest economy in the world, the Standard & Poor’s Global Financial Literacy Survey ranks America 14th in measuring the number of adults in the country who are financially literate. By comparison: The financial literacy level of adults in the United States, at 57%, is only slightly higher than that of Botswana, which has an economy of 1,127% smaller. The report estimates that only 4% of children from low-income families will break the cycle of poverty and enter the upper middle class. Education and awareness are the best ways to fight the cycle of poverty with the help of fellow citizens. To improve this statistic, financial literacy is essential and must be managed through partnerships. Tafari Norton, a second year student at the Fox School of Business at Temple University, notes that “I was able to completely change my outlook on economics once I became more educated in finance, which made me feel better. also helped improve my consumption habits and my lifestyle in general. ” Some analysts argued that only 33% of the overall US population is financially literate, leaving 67% of citizens without literacy. Imagine if, as a nation, we are able to change that and fully realize the positive externalities that it would have on our economy as a whole.

Businesses and private equity firms should invest in and support new initiatives such as Blacklinkedin which in less than a few months has over 2,000 members and has created a powerful platform to better promote black and brown businesses. This type of connectivity is needed more than ever.

Two students bond on the knowledge presented to them

To create more equity, we need to develop cohesive partnerships with companies offering financial literacy, entrepreneurial know-how, and dispel the idea that only those with significant wealth can benefit from financial literacy. McKinsey estimates that “the right business ecosystems can lessen or negate the effects of structural barriers to starting a business for black business owners – and add $ 290 billion in equity to businesses.”

By doubling down for better access to credit and leveraging power dynamics in institutions, communities of color will see a significant redistribution of wealth over time. In addition, the financial well-being of citizens in general will also allow the United States to compete better with other countries, especially China, which invest much more in financial literacy than the United States. The idea here is that better access to mentorship and resources for financial advancement will galvanize American citizens to collect better business practices that can lead to further advancements in financial technology, AI (artificial information), which will allow us to compete on a better playing field with citizens from all over the world. Organizations and businesses need to recognize that we need to come to a place where the word ‘reparations’ is used as a synonym for investment, support and financial literacy in disadvantaged communities of color in order to redefine and reinvent an inequitable economic system. , something that cannot be done aimlessly, without resources and without intentionality.

Special thanks to Tafari Norton whose writing and research skills greatly contributed to this article.

On Earl Carr

Earl Carr is the Chief Global Strategist at New York-based Pivotal Advisors. His responsibilities include working closely with the CEO and President of the Company to manage the global research team and to develop and execute the Company’s global thought leadership and cross-border business development mandate.

Geraldine L. Melton