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  • Writer's pictureJames Veal

Black Buying Power: the Good, the Bad, and the Ugly

For the past few decades, notable research institutions such as Prudential Financial research, Target Market News, Ariel Investments, The Nielsen Company and others produces annual in-depth analysis on the spending habits of African Americans in the United States. Black Buying (Spending) Power surpassed $1.4 trillion in 2020, according to the Selig Center for Economic Growth and numbers such as these can no longer go unnoticed.

This is certainly a demographic market to be reckoned with. However, the findings in these reports weren’t reported necessarily to celebrate Black economic achievements but instead to awaken corporate America of the potential buying power of the Black consumer.

According to the Pew Research Center, Blacks in the U.S. makes up roughly 14% of the country’s population - approximately 46.8 million strong. With a buying power of over $1.4 trillion and if African Americans were a country, it would rank as the 16th largest economy - GDP (gross domestic product) in the world.

Obviously, there are reasons to be optimistic as an African American and many would conclude that Blacks in America are doing quite well. But we all know darn-gone-well, that’s just not he case. Some of these figures look impressive on paper but we need to do our part and see what we can learn from these reports to better our communities financially.

To give you a bit more insight from these surveys and reports, we thought we would dive in a bit deeper to uncover: the good, the bad, and the ugly behind Black Buying (Spending) Power in America.

The Good:

  • The collective Black Buying Power of 46.8 million Black people in the U.S. is over $1.4 trillion. Prior to the Covid-19 pandemic, Black buying power was expected to reach $1.5 trillion by 2021.

  • The African American community is a growing economic force fueled by an increasingly powerful middle class. African American household income has increased for some: 35% of AA households earn $50,000 or more. Of that, 10% of households earn $100,000 or more.

  • African Americans in the U.S. are more educated today than at any previous time in history

  • African Americans remain significantly more confident about their financial situation than the general population

  • The top three financial priorities for African Americans are reducing debt, saving for retirement, and building an emergency savings account

  • There is a significant increase in African American women graduating college, landing higher professional positions, and earning more. They play a key role in their households as they’re often the primary breadwinner

  • African Americans give themselves a passing grade for managing money - including managing debt

  • African Americans are interested in investing (stocks, bonds, mutual funds, ETFs, crypto, bitcoin, real estate …) and look to their communities, friends, and churches for financial knowledge

  • 4 in 5 African Americans who are eligible to participate in an employer-sponsored retirement plan at work (401k, 403b, 457, SEP IRA, …) are enrolled

  • African Americans are more likely than the general population to require greater focus on financial literacy

The Bad:

  • Black Buying Power is equivalent to saying “Black Spending Power.” Black people have the money but the question is, “what do we do with it once we get it?” We usually SPEND it!

  • According to the Pew Research Center, roughly 30% of African American households earns less than $25,000, annually

  • Although American colleges/universities are graduating more African Americans these days, there are still an even number of Black males in prison to those attending college

  • How confident can African Americans be about their financial situation when: unemployment rates are high, student loan debt is over $1 trillion, less equity in our homes, high paying jobs are scarce, and most people are one paycheck away from total disaster

  • African Americans tend to hold fewer financial products, invest more conservatively, borrow more from employer retirement plans (401k), lack relationships with financial professionals - all of which are barriers to achieving their financial goals (according to Prudential Financial)

  • More African American women work compared to the general population and are more likely to carry the financial burden on a single income

  • As with most Americans in the U.S., financial failures are the results of a severe lack of financial literacy and basic financial educational programs missing in our schools - literally from elementary thru college

  • African Americans seek financial advice from many of those who may not be adequately licensed to provide advice, such as: friends, TV and radio shows, faith-based organizations, etc

  • Approximately 26% of African Americans (those with 401k and 403b’s at work) do not contribute as much as the employer match at work, are more than likely to invest more conservatively, and borrow more often from theirs plans than the general population

  • African Americans are open to financial advice but most financial institutions refuse to build trust, get involve, and assist in providing basic financial education to those in underserved communities

The Ugly

  • The Black dollar does not circulate in the Black community for no more than 1 day

  • African Americans are the world’s most conspicuous spenders and in the process, enrich all other cultures but ourselves

  • 30% of African American households earn less than $15,000 annually because more than likely work part-time positions or in other lower-paying seasonal jobs

  • High school drop-out-rates - especially for African American boys - are atrocious. In some major cities, high school drop-out-rates are over 50%

  • The unemployment rate for younger Blacks are near 50%

  • There is a severe lack of Black entrepreneurs, small businesses, and college graduates in the fields of science, technology, engineering, and mathematics to compete in America today

  • The median net worth of Black families is only $17,150, the typical Black college graduate still owes 95% of his or her original balance twenty years after starting, and Black Americans approaching retirement ages 55-64 only hold $30,000 in retirement savings

  • Close to 70% of Black children are born to unwed mothers in the U.S. today. The missing luxury of a dual income and a single parent taking on all of the financial responsibilities increases the likely hood of children growing up in poverty

  • African Americans have succeeded in just about every industry in America except economic empowerment and development. In a capitalistic society like the U.S., entrepreneurship, wealth building, and economic development are the keys to success

  • According to the Consumerist, those earning less than $13,000 or less annually spend an astounding 9% of their income on lottery tickets

  • Small businesses employ 90% of employees but approximately 49% of employees do not offer an employer retirement plan at work

Sign up for "Sick & Tired of Being Broke" class

Black Americans have achieved success in many fields in America. However, very deep social and economic inequities persist. Blacks suffer about twice the unemployment rates as Whites and three times as likely as White children to grow up in poverty.

There are few signs that these inequities will diminish in the near future or that market forces alone will address them. Bold economic policies will be necessary to improve the economic state of Black America moving into the future, but the first steps are to recognize just what progress has been made, and how much further we have yet to go.

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