Generational wealth is a term used by many, but truly understanding its meaning and origin is another matter. Generational wealth refers to assets a family member passes onto their heir, most commonly allocated as stocks, bonds, mutual funds, real estate, and other investments. When many individuals think of generational wealth, as it pertains to the African American community, one central term most commonly comes to mind: the gap. The gap – or the generational wealth gap – is the difference between the wealth one generation acquires compared to what the following generation acquires. Ultimately, the American dream, seemingly across all demographics, is to earn money, save money, and pass it down to our loved ones. But what if, systematically, this is harder for some and easier for others to accomplish?
Let’s explore.
Why Are We Behind?
When we think about slavery, we must not only think about the social and psychological toll it took on Blacks, but we must also focus on the economical toll it took on the community as well. Due to 12 generations being subject to slavery’s institutionalized theft, Blacks weren’t able to earn incomes and degrees, hold property, weather hard times, and pass down wealth to the next generation. While Black historical events like Juneteenth-Emancipation Day 1865 were meant to represent a change in treatment and access to resources, the Black community still had a long way to go. Further, while Blacks took hold of the new opportunity for financial gain, this brought on a new aspect of racism and prejudice for years to come.
Stories like Elmore Bolling‘s (Lee), who worked hard to gain his wealth, used it to employ other Blacks, and left wealth behind for his family, represent the possibility of Black financial attainment. On the other hand, the way Bolling’s story ended – being brutality murdered by a group of racist white men, and his family losing their money to white creditors and people who posed as such – shows the darker underbelly of the powers that limit Blacks from attaining and passing down sustainable wealth. This event occurred in the 1940s, but these stories did not start or end here.
Years of Black suffering under the white thumb impacted generation after generation. Yet, racist whites weren’t the only individuals to blame. Inadequate legislation that lacked proper punishment for such crimes for decades, was to blame as well. These crimes were ignored and even enabled with the help of things like the Jim Crow laws: the Black Codes, which continued suppression of Black financial success. As years passed, Black leaders came to fight against these inequalities, leading the Civil Rights movement for example, which helped gain more opportunity and protective legislation.
The Present-Day Fight
While the Black community has been able to gain more access, the present-day fight continues against the financial gap that still quite evidently persists. In general, it has been reported that generational wealth is hard to attain and sustain, especially when any family comes from a less fortunate background. A Daily Capital report estimates that across the board about 70% of generational wealth doesn’t make it past the second generation, and 90% disappears by the third.
Yet, while wealth disparities affect all impoverished individuals, it seems to have a particularly high effect on the Black and Hispanic communities. A Brookings report called, “Examining the Black-White Wealth Gap” shares that the net worth of a typical white family is ten times greater than that of a Black family and explores why.
The article reports that white families have had a long-standing history of having wealth, and having access to wealth for much longer periods, as compared to Blacks, due to the racial disparities that they did not face throughout history. It continues by explaining that present-day Blacks have easier access to higher pay than past generations, therefore a bit more of an equal footing to whites’ access to higher pay.
Despite this, the article explains, there is still the question of why white higher-income families still have more wealth in the present day compared to their Black counterparts. The answer is white families receive much larger inheritances on average than Black families and inheritances and other intergenerational transfers account for more of the racial wealth gap than any other demographic and socioeconomic indicators.
Begin to Build
It seems to be that access to wealth years and even decades prior uphold the long-standing generational wealth gap. Simply, if you or your family haven’t already had access to wealth then it is more likely that the pattern will persist. Luckily, there are ways to change the narrative and begin to build the wealth that you and your family have never seen. One of the first steps is to begin educating yourselves about not only the limitations that you already face but also educate yourself about what you can do to overcome these disparities.
An article written by the Rand Blog explains how African Americans can begin to gain generational wealth, by investing in the housing market. It states that while there are still setbacks that African Americans face when pursuing housing investments, such as red-lining, take advantage of housing programs that provide more opportunities in housing marketing. Programs like the Washington D.C. Home Ownership Assistance Program provide interest-free loans, gap financing, and assistance with closing costs for qualified borrowers.
Another potential solution, the article explains, is to push for policy reform. By putting more pressure on policymakers to make changes that keep African Americans from having adequate access to homeownership, it further explains that more attention should be given to persistent racism in the lending and appraisal industries. Fighting for reparations is also another example of what can be done to fight against the gap, which can help Black households to build wealth through direct payments. Also, attending college and fighting for policies that reduce the cost of college attendance and student loans is another way of improving the gap.
Be Encouraged
While the Black community still has a great amount of adversity, racism, and prejudice to face, time and resilience have shown us that our community has the willpower to push through anything or anyone, and overcome. So, in the meantime, use your voice, educate yourself, and hold yourself accountable and in due time we will overcome the generational wealth gap.