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Personal finance has failed to reckon with inequality

Erin Lowry, Bloomberg Opinion on

Published in Home and Consumer News

For example, look at the racial wealth gap. According to Federal Reserve Board data from a 2019 survey, the median wealth of Black families in America was $24,000 in 2019 compared to the median wealth of $188,200 for White families. The same data show that 73% of middle-aged White families own their home compared with 51% of middle-aged Black families; and that 30% of White families reported receiving an inheritance, while only 10% of Black families and 7% of Hispanic families reported the same.

These racial disparities are deeply rooted in U.S. history, from the scourge of slavery to the 1921 Tulsa Race Massacre to more insidious forms of segregation like redlining, a practice in which banks denied mortgages to mostly people of color to keep them from buying homes in specific neighborhoods. The financial losses that Black Americans and other minority populations have suffered have made it far harder for them to create and sustain generational wealth.

When it comes to proffering financial advice, structural gaps such as these can’t be ignored. Failing to recognize the complex ways the deck is stacked will result in advice that may be effective for some, but ultimately leave many others feeling isolated and frustrated.

“It's much sexier to sell people on the idea that anyone can reach any level of wealth than it is to say ‘actually the deck is stacked in various and complex ways’,” says Kara Perez, founder of Bravely Go, an inclusive financial education company. “But I do believe it is possible to say ‘this and that can be true, here's how’ as an educator. I also think we as consumers need to understand not everything will speak to us on a personal level all the time and that’s OK.”

Step aside (sometimes)

In the eight years I’ve been working in personal finance, there has been an explosion of new voices that has helped diversify the industry. Social media has made it easier to get financial advice from someone who mirrors your lived experience (though I always recommend vetting any expert's suggestions against multiple sources).

Kevin L. Matthews II, founder of Building Bread, a financial education company, suggests that personal finance experts can more effectively help people impacted by systemic oppression by bringing in other experts who may have more experience in dealing with those issues firsthand.

There are myriad ways to pass the mic and amplify others. It could be doing a social media takeover and having someone else interact with your community. It could be spotlighting people, books, courses and resources in your newsletters. It could be taking the time to be mindful about who you’re quoting in articles, books and blog posts.

 

Advise with empathy

One common character within the personal finance world that I’d love to see die out is shame. It’s high time we replace it with compassion.

“Shame just doesn’t work,” says Stefanie O’Connell Rodriguez, host of the podcast Money Confidential. “While researching an OpEd on this subject, I came across a lot of studies around the effectiveness of the compassionate care approach in medicine. I’d love to see [that] in personal finance.”

Approaching money matters with empathy would help defuse controversial subjects, such as student loan forgiveness, which tend to elicit reactions like, “I paid thousands in student loans without any help, so why should they get help? Do I get something for paying it back like I was supposed to?” Moving away from “me versus them” attitudes will ultimately make it easier for more people to establish financial security and start building wealth.

Personal finance experts can also use their influence to help their communities, says Julien and Kiersten Saunders, co-founders of richandregular.com. “[We’d] like to see less boasting about their investment returns and business growth and more celebration of the problems they've solved in the communities with their gains.”

Ultimately, I’m bullish on the future of personal finance. This reckoning doesn’t have to be a contentious battle between the old guard and the new “Finfluencers” on social media. Instead, this can be a collaborative process of moving from an archaic shame-based system to an empathetic approach that more people can benefit from.

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