“The financial well-being of African Americans lagged that of the U.S. population as a whole, and whites in particular. The reasons for this gap are complex, but one area of importance in addressing it is increased financial literacy.”

There are several gaps that highlight the economic and wealth inequities between America’s Black and White citizens:

• Income and wealth inequality,
• Incarceration and felony rates,
• Health care inequities,
• Life span, and
• Incidents of negative encounters with police to name just a few.

But no gap is wider than the wealth gap between the average White household and average Black household. Today, the average White family has eight times the wealth of the average Black family, according to the Federal Reserve’s 2019 Survey of Consumer Finances.

There is no single, simple explanation for the racial wealth gap, explains the Brookings Institute in a 2020 Examining the Black-white wealth gap report. It is not explained away by differences in educational attainment. It is not accounted for by indebtedness—White families actually tend to have higher levels of debt. It is not even fully accounted for by differences in income. In addition, the fact that intergenerational transfer of wealth is lightly taxed means that historical gaps persist over generations.

Effectively, gaps in wealth between Black and White households reveal the effects of accumulated inequality and discrimination, as well as differences in power and opportunity that can be traced back to this nation’s inception.

The Black-White wealth gap reflects a society that has not and does not afford equality of opportunity to all its citizens.

Wealth is the sum of resources (assets – liabilities) available to a household at a point in time; as such it is clearly influenced by the income of a household, but the two are not perfectly correlated.

Two households can have the same income, but the household with fewer expenses, or with more accumulated wealth from past income or inheritances, will have more wealth.

Closing the racial wealth gap isn’t a simple fix. But many experts say education and financial literacy can help.

What follows are excerpts from an annuity.com post entitled “Financial Literacy in the Black Community”, written by Rachel Christian and excerpts from the TIAA Institute-GFLEC Personal Finance Index (P-Fin Index).

The TIAA Institute-Global Financial Literacy Excellence Center (GFLEC) Personal Finance Index report examined the state of financial literacy among African American adults and the relationship between financial literacy and financial wellness.

African Americans have struggled for decades to build wealth in America. Historical injustices — including slavery, systematic inequality, employment discrimination, racist housing policies and other barriers — have stymied economic well-being and harmed retirement confidence for the community.

Closing the racial wealth gap in the United States is a complex issue with no one-size-fits- solution. But expanding financial literacy, education and job training efforts can help, experts say.

Financial literacy is knowledge and understanding that enable sound financial decision making and effective management of personal finances, according to TIAA.

In 2019, white Americans had a median family wealth of $188,200, while Black Americans had a median family wealth of just $24,100. Source: U.S. Federal Reserve

In 2018, just one-third of Americans could correctly answer at least four out of five financial literacy questions on concepts such as mortgages, interest rates, inflation and risk, according to a 2018 study by the Financial Industry Regulatory Authority (FINRA).

The disparity is greatest among African Americans.

According to the 2021 TIAA Institute-GFLEC Personal Finance Index, African Americans answered an average of 38 percent of the study’s financial literacy questions correctly, whereas white Americans answered an average of 55 percent of questions correctly.

Minority financial experts agree that strengthening financial literacy — the ability to use skills to effectively manage money and resources — can be the key for African Americans to achieve a lifetime of financial well-being.

Financial literacy is made of several components. The 2021 TIAA Institute Index study assess financial knowledge in eight key areas.

8 Areas of Financial Literacy

• Earning
• Consuming, such as budgeting and managing expenses
• Saving
• Investing
• Borrowing, credit and debt management
• Insurance
• Comprehending risk and uncertainty
• Recognizing trustworthy sources of financial information and advice

Borrowing is where African American financial literacy is highest, according to the study, while knowledge about insurance is the lowest.

While not a cure-all, increased financial literacy can lead to improved financial capability and practices that can benefit those who’ve been economically disadvantaged for decades and with relatively low incomes.

References:

1. https://www.annuity.org/financial-literacy/black-community/
2. https://gflec.org/wp-content/uploads/2020/10/TIAA_GFLEC_Report_AAPFinIndex_Sept2020_02.pdf
3. https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/

A tax refund is essentially an interest-free loan from you to the government.

Tax refund time is a major cash-flow event for many U.S. households. Past JPMorgan Chase Institute (JPMCI) research has shown that a tax refund was “the single largest cash infusion of the year for 40 percent of American families”.

More than three in four taxpayers get refunds, and the average amount they get back is close to $3,000, according to IRS data. That means that for many Americans, their annual refund is the biggest single check they’ll get all year.

Key tax season takeaways ascertained from JPMorgan Chase Institute research entitled “Will this tax season be a boost or bust?”:

• Roughly four out of five (~78%) of filers receive refunds during tax season.
• The average tax refund is equivalent to nearly 6 weeks pay.
• Tax refunds are essentially zero interest loans by taxpayers to the federal government.
• Tax refunds are perceived as forced savings (at zero interest) by most taxpayers.
• Taxpayers spend tax refunds differently than they spend regular salary and wages.  Studies show that many taxpayers use refunds to pay off high interest credit card balances.
• Historically, families depend on the cash infusion from tax refunds to fuel spending. Cash withdrawals, durable goods purchases, and credit payments all increase by 85 percent or more in the week after a tax refund.
• Families use their tax refunds to meet basic needs, such as healthcare expenses and groceries. Families increased expenditures on out of pocket healthcare costs by 60 percent in the week after tax refund receipt.

Diana Farrell, founding president and Chief Executive Officer of the JPMorgan Chase Institute

It’s important to understand that the tax refund check you receive from the government is the byproduct of your overpaying on your taxes. Getting a refund means that, throughout the year, you paid more of your income in taxes than required by law to the IRS, and after you file your tax return, the IRS returns your money (or overpayment) back to you.

But losing that money for months and months cost does you something — goods and services you were not able to buy (and hence benefit from), investments you didn’t make, debt you didn’t pay down, savings you did not accumulate, etc.

Nearly 40 percent of American households carry a credit card balance, and those loans carry high interest rates. . . If instead of getting a $3,000 refund come April, you’d been able to pay off $250 in credit card debt each month (or put $250 a month less on your card), you would have avoided more than $300 in interest expenses by Tax Day.

A tax refund is essentially an interest-free loan from you to the federal and state governments.

References:

1. https://www.jpmorganchase.com/institute/research/household-income-spending/tax-time-fy22
2. https://fee.org/articles/tax-refunds-your-interest-free-loan-to-the-government/

Theodore Roosevelt, known as “Teedie”–later “Teddy”, was frail and sickly as a boy. As a teenager, he followed a program of gymnastics and weightlifting to build up his strength.

Roosevelt, not quite 43, became the 26th and youngest President in the Nation’s history (1901-1909). He brought new excitement and power to the office, vigorously leading Congress and the American public toward progressive reforms and a strong foreign policy.

Early in his presidency, Theodore Roosevelt sparked a scandal when he invited the African-American educator Booker T. Washington to dine with him and his family; he was the first president ever to entertain an African American in the White House.

During the Spanish-American War, Roosevelt was lieutenant colonel of the Rough Rider Regiment, which he led on a charge at the battle of San Juan. And, as President, Roosevelt held the ideal that the Government should be the great arbiter of the conflicting economic forces in the Nation, especially between capital and labor, guaranteeing justice to each and dispensing favors to none.

Roosevelt steered the United States more actively into world politics. He liked to quote a favorite quote, “Speak softly and carry a big stick. . . . ”

Aware of the strategic need for a shortcut between the Atlantic and Pacific, Roosevelt ensured the construction of the Panama Canal. His corollary to the Monroe Doctrine prevented the establishment of foreign bases in the Caribbean.

He won the Nobel Peace Prize for mediating the Russo-Japanese War, reached a Gentleman’s Agreement on immigration with Japan, and sent a fleet of sixteen warships on a world tour. The ships were painted white to symbolize peace, and eventually they became known as the “Great White Fleet.” Roosevelt viewed the tour as part of his “Big Stick” diplomacy.

Theodore Roosevelt believed that we should all work hard and devote ourselves to a worthwhile cause. He showed incredible wisdom and insight. His quotes continue to inspire many Americans to work hard on their dreams:

“The person who succeeds is not the one who holds back, fearing failure, nor the one who never fails but rather the one who moves on in spite of failure.”

“Dreams are a dime a dozen. it’s their execution that counts.”

“If you could kick the person in the pants responsible for most of your trouble, you wouldn’t sit for a month.”

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

“Do what you can, with what you have, where you are.”

“Nobody cares how much you know, until they know how much you care.”

“The chief factor in any man’s success or failure must be his own character — that is, the sum of his common sense, his courage, his virile energy and capacity. Nothing can take the place of this individual factor.”

“To educate a man in mind and not in morals is to educate a menace to society.”

“A thorough knowledge of the Bible is worth more than a college education.”

“We must dare to be great; and we must realize that greatness is the fruit of toil and sacrifice and high courage.”

“It is hard to fail, but it is worse never to have tried to succeed.”

“The things that will destroy America are prosperity at any price, peace at any price, safety first instead of duty first and love of soft living and the get-rich-quick theory of life.”

“Believe you can and you’re halfway there.”

“Never throughout history has a man who lived a life of ease left a name worth remembering.”

“We cannot do great deeds unless we are willing to do the small things that make up the sum of greatness.”

“Get action. Seize the moment. Man was never intended to become an oyster.”

“Keep your eyes on the stars, and your feet on the ground.”

“Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much, because they live in the gray twilight that knows neither victory nor defeat.”

Roosevelt was big on taking full responsibility for your life and making a valuable contribution to the world. Nothing worth having comes easy but if you’re working toward a purpose and love what you do then you’ll enjoy the journey. For success is a journey.

References:

1. https://www.whitehouse.gov/about-the-white-house/presidents/theodore-roosevelt/
2. https://www.nps.gov/thri/theodorerooseveltbio.htm
3. https://succeedfeed.com/theodore-roosevelt-quotes/
4. https://www.history.com/topics/us-presidents/theodore-roosevelt
5. https://www.goodreads.com/author/quotes/44567.Theodore_Roosevelt

Ariel-Schwab Black Investor Survey Shows Black Americans Continue to Trail Their White Counterparts in Building Wealth
Ariel-Schwab Black Investor Survey Key Findings:

• 58% of African Americans are invested in the stock market; and, in the cohort under forty years old, that percentage jumps up to 68%.
• 25% of Black Americans own cryptocurrency; (only 15% of white Americans own cryptocurrency)
• 401(k) are no longer the entry point for many first-time investors.
• Risky investments very popular among younger Black investors
• Instead entering via cryptocurrency, individual stocks and mutual funds
• Black investors are more likely to trust and make investment decisions based on less credible information sources, such as social media

“The results of the 2020 Ariel-Schwab Black Investor Survey reveal that Black Americans are not benefitting from stock market growth at the same rate as white Americans at similar income levels”, according to the results from the Ariel Investment and Charles Schwab Black Investor Survey. “The deep-rooted gap in participation between the groups persists, with 55 percent of Black Americans and 71 percent of white Americans reporting stock market investments. This disparity, compounded over time, means that middle-class Black Americans will have less money saved for retirement and less wealth to pass onto the next generation than their white peers.”

In a year like no other, however, there is also evidence of growing engagement in the stock market by younger Black Americans, with 63 percent under the age of 40 now participating in the stock market, equal to their white counterparts, according to the Survey. The closing of this gap among younger investors is being driven by new investors: three times as many Black investors as white investors (15% vs. 5%) report having invested in the market for the first time in 2020. Twenty-nine percent of Black investors under the age of 40 were new to investing in 2020 compared to 16 percent of whites.

Beyond investing, the survey finds that Black Americans are less likely than white Americans to own almost every kind of financial vehicle, with the exception of whole life insurance, which is favored in the Black community. They are also less likely than white Americans to have written wills, financial plans, or retirement plans.

For Black Americans, disparities grow every month; while they save $393 overall per month, whites are saving 76 percent more, at $693 per month. Even Black Americans who earn more than $100,000 a year consistently save or invest considerably less than their white counterparts at the same income level.

“These differences are not new. Black Americans are disadvantaged from the outset when it comes to building wealth,” says Hobson. She notes that while 51 percent of white Americans say they have inherited wealth, just 23 percent of Black Americans have.

Carrie Schwab-Pomerantz points out that more white Americans (44%) than Black Americans (33%) are focused on preparing for retirement as their most important financial goal.

“African American investors are getting into the markets late and taking higher risk as the markets have exploded upwards over the last few years”, says John Rogers, Co-CEO and Chief Investment Officer, Ariel Investments. “As cryptocurrency has gone up, [Black investors] have been joining that chase, the same way they did during when the internet bubble occurred..getting in late and chasing the higher risk investments.”

High risk investments are growing in popularity, especially among younger Black investors. “What I worry about is when you jump in [the markets] late and get crushed when the inevitable happens, then you’re going to be gun-shy about getting back into the markets.”

People are talking about cryptocurrency and they’ve heard the people have made a lot of money and got rich quickly, so they want to jump on the bandwagon. What’s happening is that they are hearing about it through word of mouth or on the social media front. Thus, more and more people are learning how crypto works or how they think it works, and are not understanding the risk.

Investor education is extremely important, states Rogers. “We must teach young people about the investing in stock market and the value of long term investing and not speculation.”

The most important thing is financial education. From the survey, “there is a lot of evidence that both black and white Americans don’t really understand what they’re investing in”, says Kelly Johnson, Portfolio Manager, Charles Schwab Asset Management. “For example, forty percent (40%) of both cohorts [Black and White investors] came in admitting that they do not really understand their investments.” Additionally, many new investors in the markets believe cryptocurrency and NFT are federally regulated and without risk.

References:

1. https://www.aboutschwab.com/ariel-schwab-black-investor-survey-2021
2. John Rogers and Kelly Johnson, (April 20, 2022), Ariel-Schwab Black Investor Survey segment, CNBC Squawk Box,

“Bonds have nowhere to go but down since interest rates have nowhere to go but up.” Liz Young

Investment income is vital in shaping the returns on equity and debt securities.

Comparing income and yields from bonds and dividend paying stocks are a useful metric because they are a function of both the income to be received on a security and the current price of that security, according to Liz Young, Head of Investment Strategy for SoFi.

💥New column: "Six of One, Half Dozen of the Other" on how the sell-off could affect opportunities in stocks AND bonds. Yes, I used the words opportunity and bonds in the same sentence. Not a typo. https://t.co/GirNN0nAaP

— Liz Young (@LizYoungStrat) April 7, 2022

Dividend yield on the S&P 500 vs. the yield on the 10-year Treasury are a useful because they are a function of both the income to be received on a security and the current price of that security, said Young.

The simple way to read this chart would be to say the yield on a 10-year Treasury is considerably more attractive than the dividend yield on stocks. But not all yields are created equal.

There not equivalent because investors traditionally buy stocks for their upside potential, not for their dividend income.

Whereas bonds are traditionally thought of as an income generating debt asset. Which means this metric is useful, but not the end-all-be-all decision factor. Dividend stocks are traditionally thought of as an income generating equity asset.

“Treasury bond yields could hit a ceiling (meaning prices hit a floor) and start moving in the opposite direction”, states Young. “This could be caused by:

• A breakdown in the economy (thus increasing fear of recession),
• A moderation in inflation, and/or
• The Federal Reserve turning less hawkish.”

The best time to buy US Treasuries was in the early 1980s, when interest rates were peaking, and high fixed rates were destined to look good over the long term.

“Bonds have nowhere to go but down since interest rates have nowhere to go but up”, says Young. Bonds would not function effectively in the current rising interest rate and historic inflationary environment to protect investors’ downside risk. Bonds would not offer protection to downside shocks in stocks.

Historically speaking, it’s best for investors to avoid bonds when central banks print money. More cash can lead to inflation, which can lead to central banks raising interest rates higher—and put a damper on any fixed-rate assets.

“Never depend on a single income; make an investment to create a second source.” Warren Buffett

References:

1. https://www.sofi.com/blog/liz-looks-stocks-vs-bonds/
2. https://www.forbes.com/sites/brettowens/2020/08/06/the-7-best-and-worst-bonds-to-buy-right-now/