The Urgent Imperative for Business to Promote Financial Literacy in Communities of Color

Illustration by Luisa Jung

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

As a corollary, the introduction of financial literacy and mentoring programs in disadvantaged communities also serves to instill, inspire and promote greater economic prosperity and awareness. Financial literacy paired with knowledge about racial equity investing – an investment strategy that seeks to advance racial equity while generating financial returns has powerful catalytic potential to further promote entrepreneurship, business ownership and ultimately helps revitalize socio-economically marginalized communities. Historical Data has shown that if properly administered, the impact of these resources produces a multiplier effect and allows greater 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 through 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 divide is not resolved, median black household wealth is on track to reach zero by 2053 and median Latino household wealth is projected to reach zero twenty years later. In contrast, median white household wealth would climb to $137,000 by 2053.” It is critically important to note that when companies do promises and don’t follow it destroys trust and credibility and there needs to be more accountability. Following the unprecedented protests following the death of George Floyd’s 50 largest American audience corporations and their foundations have collectively committed at least $49.5 billion since May 2020 to address racial inequality. However, a Washington Post analysis found that “more than 90% of this amount – $45.2 billion – is allocated in the form of loans or investments from which they could profit, more than half in the form of Even more glaring is the fact that, while $4.2 billion of the total pledged is in the form of grants, companies have said only a small fraction – about $70 million – go organizations with a specific criminal justice focus reform, the cause that sent millions to the streets protest the murder of floyd by a Minneapolis police officer.

A report on American financial literacy from Visual Capitalist

To properly educate and provide mentoring to communities, companies need to establish a plan outlining what types of courses will be administered and which organizations would be best placed to lead them. There are different organizations such as Operation Hope, money thinks, The NFCC, and many other nonprofit organizations that work every day to bring a better understanding of financial literacy to disadvantaged communities. Plus, taking financial literacy to the next level means investing in and supporting businesses of color. RhythmCouture provides expertise in music licensing and music solutions across all media platforms. As co-owners of a black-owned business, Kyle Hunter and Robert Ronci would like to reach a wider audience, and with more corporate support, financial knowledge, and mentorship, they could scale their model more effectively. current trade.

Financial literacy courses coupled with an investment in racial equity and sustained mentorship over a long-term time horizon 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 between $50,000 and $70,000 save only $1,000 per year. However, those earning between $70,000 and $90,000 save nearly 10 times as much. Those who earn between $100,000 and $150,000 save 20 times more. Only a long-term sustainable strategy could finally begin to correct the inequitable wealth gap within disadvantaged communities.

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

Not only would this spur greater entrepreneurial innovation within communities of color, but it would also create more conscious citizens who would have a better understanding of creating racial equity as well as ownership and thus be better economic stewards of their resources. Although the United States is the largest economy in the world, the Standard & Poor’s Global Financial Literacy Survey ranks America 14th when it comes to measuring the number of adults in the country who are financially literate. By comparison: The financial literacy level of American adults, at 57%, is only slightly higher than that of Botswana, whose economy is 1,127% smaller. The report estimates that only 4% of children from low-income families will break the cycle of poverty and move into 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 key and must be administered through partnerships. Tafari Norton, a sophomore at Temple University’s Fox School of Business, notes that “I was able to completely change my view of economics once I gained more financial knowledge, which has also improved my drinking habits and overall lifestyle.” Some analysts argued that only 33% of the total US population is financially literate, leaving 67% of citizens with no literacy. Imagine if, as a nation, we could change that and fully realize the positive externalities it would have on our economy as a whole.

Companies 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 kind of connectivity is needed more than ever.

Two students bond over the knowledge presented to them

To create more equity, we need to develop consistent partnerships with companies that provide financial literacy, entrepreneurial savvy, and dispel the notion that only those with significant wealth can benefit from financial literacy. McKinsey estimates that “the right business ecosystems can mitigate or negate the effects of structural barriers to starting a business for Black business owners – and add $290 billion in equity.”

By doubling down for greater 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 as a whole will also allow the United States to better compete with other countries, especially China, which invests far more in financial literacy than the United States. The idea here is that greater access to mentorship and resources for financial advancement will galvanize American citizens to achieve better business practices that can lead to new advances in financial technologies, AI (artificial information), which will allow us to compete on a better playing field with citizens around the world. Organizations and businesses must recognize that we need to get 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 reimagine an inequitable economic system. , something that cannot be done without purpose, resources and intentionality.

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

On Count Carr

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

Sarah J. Greer