The Racial Wealth Gap & The Role of Youth Financial Education
The Racial Wealth Gap & The Role of Youth Financial Education
Investing in youth financial education can begin to address social and economic issues that have impacted communities for generations.
Communities and families across the country are being impacted daily by a global pandemic, unprecedented unemployment and underemployment rates, a national conversation about racial inequity, and arguably, the most unique school year we’ve ever experienced.
While signs of relief are on the way between school re-openings and increased vaccine availability, the disproportionate economic impact this pandemic has had on under-resourced communities and communities of color may continue to affect families for years to come.
The Racial Wealth Gap
Black families have struggled more economically from this pandemic than white families, with Black small businesses being hit twice as hard as white small businesses in terms of unemployment rates, and with more than 1 in 5 Black families reporting in 2020 that they often or sometimes do not have enough food — more than three times the rate for white families (The Washington Post, June 2020).
In 2019, the racial wealth gap between the average net worth of Black households ($17,600) and white households ($171,000) was already more than $150,000+ (2019 TIAA Institute and GFLEC Personal Finance Index). And according to the Federal Reserve’s “Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances,” white families have been able to accrue 8x the wealth of Black families and 5x the wealth of Latino/a/x families — a trend that has persisted largely uninterrupted since the 1970s.
The pandemic’s disproportionate impact on low income families and families of color seems likely to cause this gap to grow even further in our post-pandemic world.
The Pandemic’s Impact on Our Youth
From adjusting to distance learning to reduced school hours and childcare concerns — there has been a symphony of crises facing American families with school age children in the past school year. Among the challenges, disparities have been amplified by the digital divide and students’ uneven access to the technology and resources needed to engage in today’s educational environment.
For students and families who have experienced economic or medical difficulties, it begs many questions:
- Will students with disrupted learning be educationally ready for the workforce?
- Which students are falling behind the most as a result of the pandemic?
- Will scholarships for college be at risk for those whose learning has been disrupted?
- How will students finance future education if caregivers’ employment has been impacted?
Students Reporting Financial Insecurity
Amid financial stress and growing disparities, students and teachers say financial education is increasingly relevant.
Based on recent EVERFI teacher and student survey responses, a sizeable portion of both students and teachers reported to be more concerned about students’ financial futures now than they were before the pandemic. Nearly all students and teachers also agreed that financial education is as relevant, if not more relevant, than it was earlier this year.
- 34% of students are more concerned about their financial future today. (An additional 50% are just as concerned.)
- 40% of teachers list financial insecurity among the most pressing topics for their students, second only to mental health and the effects of social media.
- 90% of students say financial education is as relevant to them today as it was before the pandemic.
- 99% of teachers say financial education is as relevant today as it was before the pandemic. (Of those, 61% rate it as more relevant.)
It is with all of these financial concerns, and more, that students, teachers, and families have been asked to return to school. While the return to in-person instruction presents logistical challenges, it also provides an opportunity to continue to engage youth in a critical conversation about personal finance, all at a time when remote learning resources and financial education are more critical than ever before.
The Importance of Financial Education for LMI Communities
While there is still much uncertainty about the impact of the pandemic on student outcomes, there are immediate supports that we know can have a positive influence. Investing in financial education tools for K-12 schools not only provides a near-term boost to student financial skills and confidence, but it can also pave the way for improvements in long-term financial decision-making and financial outcomes — a critical component of closing the wealth gap.
Investments in financial education are especially important in low and moderate income communities and for students seeking to improve their long-term financial prospects through education.
According to the U.S. Bureau of Labor Statistics, 18 out of the 30 fastest growing jobs in the United States require more than a high school education, yet only about half of students who go to college complete their degree. The numbers are even more sobering for low-to-moderate income students, with only 14% of students earning their degree, in large part due to financial concerns. According to the National Financial Envestnet Partnership with EVERFI Wellness Study by Ohio State University, low-to-moderate income students find themselves under significant financial stress while on campus, with 60% reporting that they are worried about paying for school and 50% reporting that they worry about monthly expenses.
“Individuals, families and communities that have systematically experienced such socio-economic disparities and ongoing stressful life situations face greater obstacles to achieving and maintaining optimal outcomes at all phases of human development.” (American Institutes of Research, 2015).
The financial stress of financing a higher education has been compounded by the disparate impact of the COVID-19 pandemic on low-to-moderate income students on college campuses, particularly students of color. For example, 74% of college students on Historically Black College and University (HBCU) campuses are eligible to receive the Pell Grant, based on Expected Family Contribution (EFC). A recent survey of HBCU college students by McKinsey and UNCF showed that 54% of respondents reported a significant decline in financial stability.
This calls not only for immediate support, which is being provided by organizations like Netflix and Bloomberg Philanthropies in the form of a $120M gift to HBCUs and $100M gift to Black medical colleges, respectively; but also for proactive long-term investments in financial education in communities that HBCU students come from.
Youth Financial Education Can Help Level the Playing Field
Providing financial education at an early age will not eliminate the financial burden that students face while in school, but it can help students feel more prepared to face financial challenges head on and make responsible financial decisions in preparation for school, while on campus, and early in their post-college careers.
In 2019, EVERFI found that first-year college students who reported taking a personal finance management course in high school were 10% more likely to agree that they were prepared to manage their finances during their post-secondary education.
Similarly, survey data from more than 150,000 students who completed an EVERFI financial education course for middle school students shows a substantial increase in financial confidence.
% of students who feel ‘prepared’ or ‘somewhat prepared’ to ____ after taking the financial education course:
- 69% – Open and manage my own savings or checking account. (Up from 58% before the course.)
- 74% – Plan for my financial future. (Up from 68% before the course.)
- 67% – Identify my personal money values and make decisions based on those values. (Up from 55% before the course.)
- 71% – Decide what education is best for me after high school, based on my job interests and financial goals. (Up from 65% before the course.)
By sponsoring financial education for students in priority communities, organizations partnering with EVERFI can deliver innovative financial education tools that will help demystify concepts ranging from savings and credit to financing higher education, investing, and retirement, while preparing the next generation to meet the financial challenges they will inevitably face.
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