With a global health crisis, rising inflation rates, and a looming recession, many people may feel afraid of what’s next. During uncertain times, understanding your money and money basics like budgeting, saving, and investing is important to secure the financial future of both you and your loved ones. It’s especially important to ensure you have a financial plan in place for unexpected or emergency events and external factors like gas prices, rising inflation levels, etc. Much of the knowledge needed to weather financial storms and begin developing generational wealth begins with just a conversation.

Discussing money remains taboo in many Black households. However, without creating space for loved ones to feel comfortable sharing their financial experiences, many of our family and friends are at risk of being blindsided by the complexities of personal finance, especially during hard times and/or major life events. While it might seem awkward at first, having open, honest, and nonjudgmental conversations about financial health and planning can increase financial confidence and provide the building blocks for good money habits

A good way to start these conversations is by looking within. Are you a saver? Planner? Risk Taker? Think about how these traits have impacted your financial life. Take some time to think through your own financial journey – the triumphs and setbacks—and think about what conversations would have been beneficial to you or what you wish you’d known. When discussing money with family or friends, it’s essential to face issues head-on and present them honestly.

Make Dinner a Moment

According to the 2022 Ariel-Schwab Black Investor Survey, Black Americans are less likely than white Americans to have discussed the stock market as an investment avenue growing up. While over the past two years during the pandemic, these “dinner table conversations” about the stock market have increased for both groups, Black investment in the stock market has lagged.

We know that institutional and systemic issues have influenced Black wealth generation for decades. From attacks on Black Wall Street and redlining to unsurmountable levels of student loan debt and predatory lending practices, there is a history of financial trauma that may influence Black Americans’ willingness to participate in the stock market and other investment avenues. While limited resources and financial education continue to be barriers to investing, the survey cites fear and mistrust as primary reasons the Black community may be hesitant to invest in the stock market. “The hesitancy we see from Black Americans is holding people back from their full financial potential and is a major hinderance to the financial advancement of our community,” said Kelly Johnson, Portfolio Manager, Charles Schwab. The survey shows, Black Americans are less trusting of the stock market (23% vs. 30%) and financial institutions (18% vs. 28%) compared to white Americans. Black investors are also more fearful of losing money than white investors.

Developing healthy financial habits takes time. Talking with family members about your financial goals and journey is a great way to normalize "money talk" and increase interest in financial educational, saving, investing and other proven tactics that are key to wealth generation. The 2022 Ariel-Schwab Black Investor survey showed, Black investor perception of the stock market as offering a fair opportunity for all to profit improved in 2022 (48% in 2022 vs. 40% in 2020), signaling optimism for the future of Black investing. “Survey results signal a wake-up call for all financial institutions. We have a responsibility to educate and arm our underserved communities with the tools and resources needed to be able to make confident and sound financial decisions that will positively impact generations to come,”said Kelly.

Financial Literacy is the Game-Changer

Both Black and white investors largely agree that increased financial education in schools is one of the best ways to help address wealth inequality, but especially for youth and younger generations. There has been a significant uptick in Black investing and the young Black investors under 40 are leading the way. However, survey data reveals some cautionary elements. fifty-eight58% of young Black investors under age 40 report investing in something they did not fully understand and 51% say they have invested based on something they saw on social media.

While social media is a tool to stay up to date on the latest trends and information, it is also a breeding ground for untested investing theories, fraudulent scams and misinformation. For young Black investors who are eager and prepared to get started investing it’s best to talk to a professional before diving into the market.
Closing the wealth gap will require increased efforts from both consumers and institutions. We know familial influence can go a long way, so having family financial conversations can certainly help fill the gap and increase your confidence with money matters. Financial institutions must also do their part to address the gap between Black and white investing and increase financial literacy and education in underserved communities. “Our survey results show that now more than ever, Americans need access to the educational tools that will inspire them to invest with confidence. It is incumbent upon our industry to increase accessibility to reliable resources,” said Arielle Patrick, Ariel Investments Chief Communications Officer. “There is a real opportunity for each of us to expose one another to investing concepts early and often through candid conversations about money. This is the first step in confronting a major problem: economic inequality perpetuated by financial illiteracy."

Family financial conversations are necessary to help your loved ones get the financial knowledge and foundation needed to approach their financial journey with smart decision making, confidence and sound judgement. Passing on what you have learned may help someone start a business, buy a home, or create a financial portfolio that will benefit their family for generations. It all starts with a conversation.