When it comes to our financial well-being as women of color, it's more critical than ever in today's world.
This is because we are faced with particularly unique challenges that impact our ability to build long term wealth in comparison to our white counterparts. As a result, the stats around wealth-building for women of color are staggering.
To provide additional context, the median net worth for single white women is $15,640 and $28,900 for single white men. This meant that net worth for women of color amounts to less than a penny for every dollar of wealth owned by single white men.
And this is despite women of color obtaining college and graduate degrees in increasingly higher numbers. And despite the fact that the number of post-secondary degrees earned by black women alone outpaces women in all other demographics.
Statistics like this are incredibly depressing.
But what specifically are these unique challenges we face that caused our net worth to be so low?
The unique challenges women of color face that affect our financial well-being
Some of these particularly unique challenges include:
1. A lack of financial literacy resources and financial services that cater to women of color
When it comes to financial literacy, for the most part, it's not taught in schools or colleges. However, our ability to build wealth has a lot to do with our financial education. Not only does having financial education allow us to make smart financial decisions, but it also helps us recover quicker from economic devastation.
For instance, understanding the importance of having an emergency fund or knowing the right kinds of insurance to leverage. And even understanding what it means to invest and how to diversify our portfolios can make a huge difference.
While financial literacy alone is not the solution to the racial wealth gap, it gives us the right foundation. Having financial education equips us with the knowledge we need to take the necessary actions to build wealth.
In addition, when it comes to financial products and services, it doesn't take long to realize that this industry is a primarily male-dominated one.
Yes, there are many products great products and services available. However, most of today's financial services don't necessarily cater to our unique needs as women.
2. The profound effect of the gender wage gap on women of color
We are all aware of the gender wage gap. On average, women earn 20% less than white males. Black women are typically paid just 62 cents and Latinas are typically paid just 54 cents for every dollar paid to white, non-Hispanic men.
Regardless of their occupation, level of education or years of experience, women of color are still paid significantly less than their white male and female counterparts across the board.
This wage gap showcases sexism, white supremacy, and the devaluation of the value of our labor as women of color.
3. The investment wage gap women of color face as a result of the wage gap
A direct outcome of the gender wage gap is the investment wage gap. Compounded by gaps in financial literacy, women of color not only earn less but are also investing less...or not at all.
And even if we invest at the same percentage rate as our white counterparts, we are still investing less due to our lower earnings. This means we have less money to support our retirement and other long term goals.
This alone is devastatingly impactful to the ability of people of color to close the racial wealth gap.
4. Women of color carry majority of the student loans debt in the US
As of 2020, $929 billion of the $1.54 trillion outstanding student loan debt in the US is held by women. And when broken down by demographic, black women have the highest student loan debt of any racial or ethnic group. This means women are carrying the bulk of the weight of the US student loan crisis.
Yes, we are getting college and graduate degrees at a record pace but it comes at a great financial cost continuously being compounded by interest.
And again, lower earnings due to the gender wage gap has a huge impact on women's ability to pay back their student loan debt.
5. Lenders specifically target women of color with higher interest rates
The practice of lenders targeting women of color with higher interest rates when compared to their white counterparts with similar financial standings is more common than you might think.
A classic example is mortgage discrimination. A practice collectively costing blacks and Latinos millions of dollars and crippling our ability to pass down generational wealth.
And while there are federal laws in place that forbids discrimination in all aspects of residential real-estate related transactions, this practice still occurs.
These are just a few of the unique challenges women of color face that make our financial well-being so critical.
But does financial well-being really mean?
What does financial well-being mean?
Financial well-being is defined by the Consumer Financial Protection Bureau, as having financial security and financial freedom of choice, in the present and in the future. It is a very personal state that you can achieve regardless of your income.
Having financial well-being means having a sense of control over your day to day finances. It means having the financial freedom to make the best life choices for yourself.
And it means being on track to achieve your financial goals and absorb any emergencies or unplanned life situations either in your personal or the broader economy.
How women of color can establish financial well-being
When it comes to creating financial well-being as women of color, it starts with setting the intention and adjusting your mindset.
It also involves identifying your "why". Your why could be based on what you want to accomplish in life. Or it could be based on the legacy you want to leave for your children or your community.
Next, you want to take intentional steps to increase your net worth. This means:
- Managing your money intentionally by budgeting, paying down debt, saving more, and investing more.
- Working on increasing your income by negotiating your salary, asking for raises and/or starting a business to support your financial goals
- Teaching your children about money and financial responsibility
There are tons of resources to help support you as you work on your financial goals. Be sure to check out our ultimate financial, career, and business book list as well as our free courses and resources.
While the challenges we face as women of color are discouraging, you can use them as the motivation you need to change the narrative. For yourself, your children, your family, and your broader communities.
Use your voice to impact change
Achieving financial well-being doesn't just stop with your personal economy. You can use your voice to petition broader change as well.
You can petition Congress to pass stronger legislation to address the gender wage gap. And to provide more grants for low-income and minority students to reduce the amount of student loan debt they have to take on. You can call out racism and use your dollars to support organizations fighting racial injustice.
Change.org is also a great place to add your signature to petitions for change that you are passionate about.
These are just a few things you can do to start impacting change with your voice and hard-earned dollars.
Your financial well-being is possible
While it remains especially challenging to achieve financial wellness as a woman of color, it is totally possible. Set the intention to succeed, get clear on your financial goals, educate yourself, and start taking action.
At the end of the day, no one can care more about your financial wellness that you can. And when you are able to achieve financial well-being you gain power.
Clever Girl Finance is here to support you, now and always.