The Kaiser Family Foundation reports that, even before the coronavirus pandemic, the 2019 poverty rate among African American families was more than twice that of white families in the United States, approximately 22%, compared to 9%, respectively. Based on data published by the Federal Reserve, average white family wealth is eight times greater than the wealth of an average black family in the United States. Factors that are within and beyond the control of African American families contribute to low wealth accumulation, including low educational attainment, low homeownership rates, broad financial illiteracy, and structural inequality.
Despite high-profile examples of black progress in the United States, structural inequality remains persistent in most American institutions, especially real estate. According to a 2018 Brookings Institute study, housing values in predominately African American communities were undervalued by an average of $48,000 per home, amounting to more than $150 billion in financial losses. Sadly, structural biases are common at nearly every phase of the home-buying process. African Americans are targeted for risky subprime loans, even when they qualify for conventional loan products. Appraisers often undervalue homes in predominately African American communities and homes owned by black people in racially diverse communities. Also, property taxes are an average of 13% higher in African American communities than majority-white communities.
No longer waiting for elected officials, policymakers, and others to address age-old structural barriers that impede progress among historically marginalized groups in America, a new generation of African American achievers has committed to changing the things they can personally control to put their families on the pathway to financial independence. According to the National Center for Education Statistics, for example, African American women have earned college degrees at increasingly higher rates between 2011 and 2019. And Young African Americans participating in the Financial Independence Retire Early (FIRE) are creating and passing along generational wealth, one dollar at a time.
To some, the term “FIRE” invokes thoughts of trendy fads. To others, “FIRE” means freedom. Participants in Financial Independence, Retire Early Movement commit to saving and investing at a young age so they can live off of passive income and possibly retire early. This movement is becoming increasingly popular among young African Americans, including many who grew up in households with few resources and financial literacy was not taught. Participants have made small but significant changes in their spending habits, such as forgoing unnecessary purchases to fund their savings and investments for the future. By delaying gratification, black FIRE participants are ending the curse of poverty that has, unfortunately, plagued that African American community since our involuntary arrival in the Americas.
I salute the FIRE Starters, especially those reared in homes in which financial literacy was not taught.
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