Tiffany Grant grew up in a home where money was taboo.
“In some households, including mine, that’s grown folks’ business. That’s grown folks’ conversation. Nobody talked about money at all.”
Grant’s grandparents raised her until she was 12 and then she moved in with her mom. She remembers the five-inch high stack of credit cards her mother used when shopping.
“I knew as a child if we went to the store, I could get whatever I wanted. She would use a credit card, we would walk out of the store and we’d be fine.”
Grant also learned that actions have consequences.
“My mom had to file bankruptcy,” she says. “My grandparents had to file bankruptcy. Then my mom went through a foreclosure. Seeing all that as a child, I put two and two together and thought it must result from all these credit cards and things like debt accumulation.”
According to Pew Research, most Black Americans experience economic insecurity, with roughly seven in 10 saying their finances were in fair or poor shape.
Grant was determined not to be one of those people.
The Financial Literacy Gap
The data doesn’t lie. The United States has a financial literacy problem.
Only 57% of U.S. adults are financially literate, meaning they have basic knowledge of financial concepts like interest, inflation, risk diversification and compound interest. According to a 2022 report from TIAA (No. 8 on Fair360, formerly DiversityInc’s 2023 Top 50 Companies for Diversity list), it’s even worse for Black and Hispanic Americans when compared to other groups.
“If you look at whites and Asian Americans, at least 20% of them have very high levels of financial literacy. But for Black and Hispanic Americans, the number is less than 6%,” says Paul Yakoboski, Senior Economist at the TIAA Institute. “Those racial gaps in financial literacy levels are significant threats to many in those communities. To be sure, the gaps have nothing to do with capability. They’re more likely because of systemic factors and demographic differences, such as age, education and income.”
TIAA also found that people with a low level of financial literacy are twice as likely to have decreased their retirement savings and more than four times as likely to have stopped saving for retirement compared to their peers with very high levels of financial literacy.
“Cutting back on retirement savings may appear to be a painless way to cope, but it involves costs that those with greater financial literacy may be more aware of, such as lost employer-matching contributions and lost compounding over time of the money that is not saved,” says Yakoboski.
READ: The Retirement Race Gap: An Uncertain Future for People of Color
With low financial literacy rates comes stress and anxiety about money and finances, primarily among Black and Hispanic adults.
Aya Egbuho remembers questioning why her primary caretaker struggled to pay the rent when the amount was the same monthly.
“I internalized a lot of emotional baggage around financial literacy, fear, anxiety, avoidance and that’s not the way to go,” she says.
The anxiety about money continued when Egbuho was older.
“I would have more than enough money,” she says. “I was paying all my bills on time, but still feeling so anxious. For me, a lot of it was a feeling thing. I just dreaded it. One day it hit me. I was reading a book, not even about financial literacy. I was reading a book about something else. Maybe you have these feelings because you don’t know too much. So it’s time for you to learn about it.”
READ: The Inheritance No One Wants: Breaking Generational Poverty
Educating the Next Generation of Workers
Most Americans think schools should teach financial literacy. Yet, only 23 states require students to take a course in personal finance to graduate, according to an annual survey from the Council for Economic Education.
“A lot of them are leaving it up to the school district and to the educators to figure out how to integrate some key concepts into their coursework,” says Bonnie Wallace, Head of Financial Health Philanthropy at Wells Fargo (No. 32 on Fair360, formerly DiversityInc’s 2023 Top 50 companies for Diversity list). “There’s not a lot of standardization in terms of content or curriculum, and there’s very little measurement going on.”
Wallace says that’s why digging beyond the state mandates is essential.
“One, are the teachers trained? Two, do they have a curriculum, resources and tools? And three, are those curriculum resources and tools deployed equally across that state? We know that there’s a lot of inequity with schools to begin with,” she says. “We start with a situation where there’s inequity in the community and then you layer on top of that inequity in the efforts to provide financial education.”
READ: Unbanked and Unstable: The Financial Dilemma for Low-Income and Communities of Color
Financial Literacy for All is a 10-year national initiative to educate millions of youth and young adults. Member organizations include U.S. Bank (No. 11 on Fair360, formerly DiversityInc’s 2023 Top 50 Companies for Diversity list) and Mastercard (No. 1 on Fair360, formerly DiversityInc’s 2023 Top 50 Companies for Diversity list).
Companies like TIAA and Wells Fargo are targeting the next generation’s workforce by teaching financial literacy to students as young as kindergarten and as advanced as college. Since 2015, EVERFI has powered TIAA’s community impact and education initiatives, serving more than 25,000 K-12 learners. Wells Fargo’s Money Matters program collaborates with historically Black colleges and universities (HBCUs) to improve financial wellness for college students of color.
“We believe at HBCUs that these students can be catalysts for closing the racial wealth gap,” says Wallace. “Not only do they have the ability to change their financial situation, but many of the HBCUs — and I would probably dare say all — focus on giving back to the community.”
READ: The Cost of Getting Sick: Black Americans and Medical Debt
Financial Wellness at Work
A little more than half of employers offer financial wellness programs, including investment and planning education or webinars that provide broad-based financial knowledge, according to a survey by the Employee Benefit Research Institute (EBRI). The EBRI notes that increased adoption of the programs could be challenging as companies weigh increased costs and the impact on productivity, worker satisfaction, attraction and retention.
“More employers should consider taking steps toward empowering employees,” says Yakoboski.
“Help them learn more about their financial wellness before they reach the age of retirement. Just like companies offer medical benefits, financial wellness benefits should also be a given. The end objective is not financial literacy for the sake of financial literacy. The end objective is financial well-being and financial security.”
Capital One (No. 28 on Fair360, formerly DiversityInc’s 2023 Top 50 Companies for Diversity list) focuses on giving its employees the same support as its customers. The company recently launched a financial literacy program to help workers understand their financial situations.
“Through 30-minute self-paced modules with articles and webinars, our associates can learn practical strategies for building savings, sticking to a budget, and getting rid of debt — the topics we heard are most important to them,” says Ralph Haro, Managing Vice President of New to Credit at Capital One. “These programs are helping build healthy habits to improve financial well-being, lower financial stress, and feel healthier all around.”
READ: What is Health Equity?
Financial literacy and financial wellness are interconnected. People with higher financial literacy tend to have more retirement and non-retirement savings and manage their debt better. The National Urban League says that’s especially true for Black Americans.
Grant’s childhood experiences inspired her to start a financial counseling and education website. She wishes financial wellness programs had been available when she entered the workforce.
“Employees spend eight or nine hours of their day at the job, so they’re there the majority of their waking hours,” says Grant. “People that may not have access to financial wellness outside of the employer still have to show up at work every day. As an employer, you could be the catalyst that helps your employees develop better spending habits and budgeting skills.”
Egbuho believes that financial wellness programs will only be effective if they are mandatory. She stresses that companies need to be sensitive in their approach in a way that fosters equity.
“You have to account for things, such as people’s backgrounds. People have different starting points,” says Egbuho. “If you don’t have X, Y, and Z and you tell me it’s the basics, I’m already feeling excluded. You’re not accounting for those people.”
