For the past three years Prudential Financial has released a report titled “African American Financial Experience.” It includes a survey of over 1,000 black Americans across the country to assess the financial health of our community. And the results of this year’s survey tended were generally positive, with respondents generally reporting improving financial situations. So today, I wanted to talk about the results, both the good and the not so good.
Can you tell us the good news first?
There is some really good news in the survey. First, 54 percent of African American respondents said their financial situation is better than that of their parents, and this is in the wake of one of the worst recession in our nation’s history. On top of that, 58 percent of respondents said they believe their family’s next generation will be better off. In the general population, just 46 percent of people said the same, so its clear that there is a feeling of the optimism among in our community when it comes to economic prospects, even as we continue to confront the realities of race in this country. Finally, when it comes to financial decisions, 52 percent of respondents feel they are well prepared to make them, compared with just 40 percent of the nation as a whole. These three findings tell me we are moving in the right direction overall.
What about the other findings?
Well there were some questions of divergence. Once of the questions asked respondents to grade themselves on their financial knowledge. The survey found that relatively high percentages of blacks gave themselves good grades when it comes to managing household budgets, and managing debt and money. However, when it came to subjects like knowledge of investing, estate planning, and saving for a child’s education, low numbers of respondents gave themselves good grade. On another question, when asked whether they would describe themselves as a saver, a spender or an investor, 59 percent of blacks said they were savers, while just 11 percent described themselves as investors.
Did the survey find any areas of concern?
There were two findings that really warrant pointed out. First, when it comes to those respondents that have access to employer retirement plans, 74 percent said they contributed, compared to 85 percent of the general population. That means that there are a lot of people in our community not taking advantage of these plans to build for retirement. Secondly, just 14 percent of respondents said they work with a financial professional, compared to more than a quarter of the general population.
What should we take away from these results?
The first thing that sticks out to me is the optimism. Not only is it good news, is means that the slow and steady recovery following the Great Recession has been felt in our community. Second, there are areas where need to push to do better. For example, if you do not feel comfortable with your knowledge about investments or estate planning, do some research online, or reach out to resources in your personal or professional networks. It does no one any good to remain in the dark. Finally, you HAVE to take advantage of employer sponsored retirement plans. A full 26 percent of black Americans with this option are missing out, and that is a big mistake.
Great, Mellody! Thanks for joining us this morning to tell us about this survey!
You are welcome, Tom!
Mellody is President of Ariel investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News.