Financial Literacy for Black and African American Students
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- Learning financial literacy can help students make confident money-management decisions.
- Many scholarships and grants for Black and African American learners are available.
- Financial literacy can help build greater individual and generational wealth over time.
What Is Financial Literacy?
Being a financially literate person means making smart financial decisions that help build wealth, reduce debt, and prepare for the future with solid investments.
Black and African American students typically have less access to a financial literacy education. However, college is a great time to learn the basics of this all-important topic.
Becoming financially literate helps degree-seekers understand how their student loans actually work, identify alternative ways of paying for college, create — and stick to — a budget, and set aside money for the future.
Why Financial Literacy Is Important for Black and African American Students
The median Black graduate’s student loan debt is $30,000, $7,000 higher than their white peers: From this data, it’s clear that many Black and African American students do not receive or have access to the type of personal finance education required to make informed decisions about how much student loan debt to take on and how to use the funds.
Black households had median wealth of $24,100 in 2019, as compared to $189,100 for white households: In addition to earning disparity among minority groups, Black families possess less generational wealth. Because of this, Black students end up taking out more student loans rather than receiving help from their families.
African Americans answered 38% of questions on a financial literacy test correctly, compared to 55% for white examinees: African Americans are not getting the access they need to a financial literacy education and resources. These tools can help individuals understand the principles behind earning, saving, budgeting, and investing.
Black borrowers have the highest average federal student loan monthly payment at more than $336: Because Black students commonly take out higher amounts of money in student loans, they are under much more financial pressure. They often have higher monthly payments that make it difficult — if not impossible — to build personal wealth.
Just 11% of Black student loan borrowers paid off their debt before turning 40: Compare that to 32% of white borrowers. Because student loan servicers charge such high interest rates, the principal amount owed on the loans continues to grow after graduation, despite keeping on track with monthly payments.
“Financial literacy is important for Black students because for so long that information and those resources were withheld from them. Their parents were denied that information, and, therefore, it was never passed down to the next generation. By learning at an early age, the students will have a better chance at success and be able to accumulate wealth the earlier they can get started. The African American community generally knows they are supposed to save their money but don’t know how to make their money work for them. There is also a distrust in the African American community when it comes to banking services and wealth management. That is why it is important for them to have a base knowledge of finances so they will not be taken advantage of and they will know who to contact to get guidance. That knowledge will also lead to conversations with other family members and friends which will create more financial literacy within that community.”
4 Factors to Consider for Financial Planning
Student Loans:Student loans play an important role in bridging the cost gap and allowing Black students to attend college. However, they are not without their detractors. Black and African American students need to have a comprehensive understanding of these loans before signing any paperwork.
Scholarships and Grants: With so many scholarships for African Americans available, students can significantly offset their costs — and how much they need to borrow in student loans. Scholarships and grants provide a great option since they do not need to be repaid as long as the student meets the terms of the award.
Credit Cards: Credit cards can seem appealing when living on a tight student budget. However, learners must understand both the pros and cons of getting a credit card as a student. This includes the exorbitantly high interest rates for any unpaid balances at the end of each month.
Saving and Budgeting: Learning how to budget while still in college can help set students up for a lifetime of smart money choices and opportunities to save. Black and African American students can use many different free and paid apps for saving money while in college and beyond.
“I think the No. 1 point I would make to Black students is to ask if you don’t know. It’s OK not to know. I would also say prioritize and start early and often. Although it may seem like something you can put off until later down the road, you are better suited to start early and won’t have to contribute as much because your money will have more time to grow.
I also believe understanding the difference between saving and investing is very important for students. Once out of school and working on their own, young adults need their money to work for them and grow for their future. Money that is just sitting in a savings account or sitting in cash will not keep up with the cost of living. For example: If I put $10,000 in a bank account and left it in cash, that $10,000 will not buy me the same things in 30 years that it can buy me today. They should think in terms of compounding. Compounding will grow their money.”
Financial Literacy Resources for Black and African American Students
“Brown Ambition”: This popular podcast for Black and African American students covers important financial literacy topics and provides advice from others who have learned financial literacy and used it successfully.
Urban Wallet: Urban Wallet provides a wide variety of free guides and resources to help students learn about spending and budgeting, investing in cryptocurrencies, and using credit cards responsibly.
Association of African American Financial Advisors (AAAFA): In existence for more than 20 years, AAAFA is a great resource for Black and African American students looking to work with a financial advisor to learn more about money.
Operation HOPE: This nonprofit works with students and other adults alike to provide financial dignity through financial literacy training, coaching, and other services to build confidence and resilience. Programs are offered for free.
Building Bread: Designed for Black students and young professionals, Building Bread provides a free financial planning course along with other low-cost advanced classes. Some topics covered include investing, creating a portfolio, and identifying great stocks.
Meet the Professional
Terrance Dedrick, CRPC®, AAMS®, AIF®, is a successful, African American millennial who is a financial advisor active in his community. He spends a lot of time working with young people and money. Terrance Dedrick is a genuine people person and enjoys building strong partnerships with clients, helping them to pursue their goals in life. As an Accredited Asset Management SpecialistSM, Chartered Retirement Planning CounselorSM and Accredited Investment Fiduciary®, he strives to help clients make the most of their money and seeks to educate them on best practices. Terrance Dedrick is part of a father-son team making up Dedrick Wealth Management Group. He believes in the importance of financial literacy, and speaks about financial planning at high schools and community organizations.
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