African American Personal Finance Knowledge: Demographic variations among African Americans
New Insights from the Personal Finance (P-Fin) Index
Financial literacy varies across demographic groups among African Americans (Figure 4). Observed variations in the average percentage of P-Fin Index questions answered correctly are consistent with those identified among the U.S. adult population as a whole.8
• Financial literacy is significantly higher among men. There is a seven percentage point difference between African American men and women in the percentage of index questions answered correctly.
• Personal finance knowledge tends to increase with age. One-third of index questions are answered correctly on average among African Americans under age 45, compared to 43% among those ages 45 and older.
• Personal finance knowledge tends to be greater among those with higher household incomes. There is a 29 percentage point difference in P-Fin Index questions answered correctly between African Americans with household incomes below $25,000 and those with household incomes of $100,000 or more.
• Financial literacy varies with employment status. In particular, unemployed or disabled9 African Americans have markedly less personal finance knowledge than those employed10 and those retired.
In the U.S. adult population, financial literacy tends to be greater among those with more education and those who have received financial education.11 The same holds among African Americans (Figure 5).
• College-educated African Americans answered 53% of the P-Fin Index questions correctly on average, compared with 24% among those with less than a high school degree.
• There is an 11 percentage point difference in the percentage of index questions answered correctly between African Americans who have participated in a financial education class or program and those who have not done so.12
8 See Yakoboski, Lusardi and Hasler (2019).
9 Includes those unemployed or on temporary layoff, as well as those disabled and unable to work.
10 Includes those employed full time, part time and self-employed.
11 See Yakoboski, Lusardi and Hasler (2019).
12 See Lusardi and Mitchell (2014) for a discussion of existing research regarding the relationship between financial education programs and financial literacy levels, as well as the challenges inherent in empirically establishing causality and effectiveness.