Financial literacy, wellness and resilience among African Americans: Introduction
New insights from the Personal Finance (P-Fin) Index
The financial situation of African Americans lags that of the U.S. population as a whole and of whites in particular. Simple economic indicators illustrate the gap. While 66% of African Americans report that they are doing at least OK financially, the comparable figure among whites is 78%.1 Median household income among African Americans was $35,400 in 2016; median household income of whites was $61,200. African American household net worth was $17,600 in 2016 and 19% had zero or negative net worth; the analogous figures for white households were $171,000 and 9%, respectively.2
The gap is evident in more nuanced indicators, as well. According to the 2018 National Financial Capability Study (NFCS)3 :
Forty-two percent of African Americans who were employed full time engaged in additional work for pay; the comparable figure among whites was 28%.
African Americans are more likely than whites to feel that they currently have too much debt (45% and 35%, respectively).
African Americans are less likely than whites to be homeowners (42% and 66%, respectively). Among homeowners, African Americans are more likely to have been late with a mortgage payment in the past year (46% compared with 14%).
African Americans are more likely than whites to carry student loan debt (41% and 21%, respectively). Among those with student loan debt, African Americans are more likely to have been late with a payment in the past year (59% compared with 35%).
Among credit card holders, 68% of African Americans engage in expensive credit card behaviors compared with 36% of whites. Such behavior includes paying only the minimum due, incurring late payment fees, incurring over-limit fees, and taking cash advances.
This report uses data from the third wave of the TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) to examine the current state of financial literacy among African American adults and the link between financial literacy and financial wellness. Financial literacy is knowledge and understanding that enable sound financial decision making and effective management of personal finances. As such, greater financial literacy contributes to greater financial well-being.
The P-Fin Index is unique in its capacity to examine financial literacy across eight areas of personal finance in which individuals routinely function, in addition to providing a robust indicator of overall personal finance knowledge and understanding4. The online survey is fielded each January with a sample of U.S. adults; the 2019 sample consisted of 1,008 individuals5. At the same time, the survey is also fielded with a separate oversample of a particular demographic group to enable detailed analysis of that group; 1,015 African American adults were oversampled in 2019.6,7 Previous oversamples were Hispanics in 2017 and millennials in 2018.
1 See Board of Governors of the Federal Reserve System (2019).
2 See Board of Governors of the Federal Reserve System (2017).
3 See FINRA Investor Education Foundation (2019).
4 See Yakoboski, Lusardi and Hasler (2019) for a full discussion of the P-Fin Index and 2019 findings for the U.S. adult population.
5 The sample was drawn from Ipsos’ KnowledgePanel, which is a large-scale probability-based online panel. The sample was weighted by gender, age, race and ethnicity, census region, metropolitan status, education level, household income, and language proficiency to be nationally representative of U.S. adults, ages 18 and older.
6 There is no overlap between members of the general population sample and the oversample; the 120 African Americans in the general population sample were not included among the 1,015 members of the African American oversample.
7 The African American oversample too was weighted by gender, age, census region, metropolitan status, education level and household income to be nationally representative.