Study: African American Wealth Still Trails

WASHINGTON —  Although both the income and wealth of black households have been increasing, they still trail well behind American households as a whole, a new study shows.

Although black household wealth grew 321% from 1989 to 1998, the median net wealth of a black household was only $15,500, compared with $71,700 for all U.S. households, according to an analysis of the most recent Federal Reserve data on household finances. The study, by the Consumer Federation of America, defined “net wealth” as assets minus debts.

To help close that gap, Black Entertainment Television, BET.com and the Consumer Federation on Thursday announced the establishment of “Black America Saves,” a program offering financial-planning assistance and education about the importance of savings and home equity.

The goal of the program is to increase awareness and “emphasize the importance of black wealth,” said Debra L. Lee, president of BET. The network plans to include a segment on building wealth in its regular Friday night news show. The home page of BET.com now links to a page that features news articles, a variety of financial calculators, a financial quiz and the Black America Saves Club.

Club members will receive a newsletter, savings tips and free telephone or Internet financial advice. The program is sponsored by the Bank of America Foundation.

Black America Saves is based on America Saves, a campaign to “encourage nonsaving Americans to build wealth more effectively,” said Stephen Brobeck, executive director of the Consumer Federation.

Ronda Welch is a participant in the pilot program of America Saves in Charlotte, N.C. She recently attained her first financial goal: saving money to pay cash to have the interior of her house repainted instead of using a credit card. Now, she is saving for carpet for her three bedrooms, and her ultimate goal is to pay off her credit card debt and save for a new car.

The 40-year-old divorced mother of a teen son said the program “was just a reminder for me, because I was doing a lot of the things they were pushing.” Welch has posted a large sign on her refrigerator door reading “Ronda Saves,” a takeoff on the program’s name.

The Consumer Federation’s 18-month-old demonstration project in Cleveland found “tremendous pessimism about being able to build wealth,” Brobeck said.

Working-class Americans “did not think they could do it,” he said. “We found that $1,000 savings seemed to be an insurmountable goal to many people.” Cleveland Saves has signed up 2,000 participants in 18 months, he said.

For all the attention on black households, Brobeck said wealth disparity is based not on race but on income. Black households are overrepresented in the lower-income category because of “differences in income, family inheritance and contributions to dependents,” according to the study.

The study found that lower-income households are less likely to save, tend to overspend their income and have a shorter financial “planning horizon.”

Just over half as many black households had net wealth of at least $100,000, as compared with all American households, while almost twice as many black households had net wealth of less than $10,000.

“We are trying to communicate to middle America, to working-class America, that they can build wealth as well,” Brobeck said. “But one has to be patient; one has to be smart; one has to be disciplined.”

“Over time, it is realistic to expect most low-and moderate-income families to build six-figure wealth. That is very realistic.”

The Consumer Federation based its study on an analysis of 1998 Federal Reserve System data on the consumer finances of 4,000 households conducted by Catherine Montalto of Ohio State University.