Many factors contribute to the racial wealth gap, including lack of access to a financial education that can help families make ends meet. The racial wealth gap is structural, but financial education is still needed — Experian reports 76% of Gen Z students wish they had personal finance classes in school. While structural and political solutions are necessary to solve the full problem, bridging the racial gap in financial literacy can start by broadly offering personal finance courses in schools and providing more access to free online resources.
A study from FINRA found that financial literacy rates were lopsided when split by racial data. The study found White and Asian-American test-takers scored higher on a basic assessment than Black and Latinx test-takers — a pattern which held when applied across age groups.
Similar factors that cause the gender gap in financial literacy may also be at play in the racial wealth gap. Many point to men’s tendencies to be more financially educated than women when trying to explain the gender gap. Socioeconomic factors also bar minority groups from proper financial education, such as higher rates of unemployment and less access to wealth-building resources.
Financial Education in Schools Can Help
Traditionally, lack of financial education was synonymous with lack of personal responsibility and parental guidance, but recent data suggests that of the five primary sources for financial education — high school, college, family, employer, and the military — there are structural hurdles that hurt non-White families’ abilities to teach at home. The racial gap holds even when parents provide financial education, suggesting that at-home teaching is less effective for minority groups than for White families. Meanwhile, financial education from high schools and employers offered the same benefits across the racial divide.
Experts suggest closing the racial wealth gap by teaching financial literacy in schools and providing access to financial counselors. The U.S. Financial Literacy and Education Commission proposed tailoring financial education to communities in need, citing that this focus helps motivate people to learn financial strategies. One-on-one counseling has also been proven effective, particularly as part of the economic recovery from COVID-19. As the country’s economy heals, there needs to be financial education in schools to protect our most vulnerable communities.
Financial Education is Out There
For access to free digital tools, check out our Financial Literacy Month blog posts on financial education resources and apps. With the right resources, minority communities can approach long-term goals like increasing financial literacy and building personal wealth while the country works toward the structural results that promote equal access to financial health.
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