Broke: Outdated Financial Advice Black Folks Need to Stop

Think saving is the only path to wealth? Think again! What if I told you that saving is great but investing your money is better, instead of saving “shoe box money” you should actually save money in a high-yield savings account, and instead of not using credit cards at all, you should actually educate yourself on how to properly use a credit card so that you can build, achieve and further your financial goals.

It’s no secret that the racial wealth gap between Black and white households has been a problem for years, decades even. According to the U.S. Census Bureau’s Survey of Income and Program Participation, households with a white, non-Hispanic householder had ten times more wealth than those with a Black householder in 2021. As of April 2024, Black households in the United States only held 4.7 percent of the country’s wealth, despite making up 13.6 percent of all households.

Now, for most of us… I know your dad, mama, grand-mama, aunties, uncles and so forth gave you financial advice at some point, and even made it seem like(or maybe they didn’t) that they had it all together financially, but hear me out. How many of our relatives are considered wealthy? How many of our relatives have investments like properties, stocks and bonds? How many of our relatives are in bad debt? How many of our relatives have a credit score that’s 700 or higher? We have historically been taught to save money rather than invest our money, we have been taught not to take “financial risks” but rather play it safe, and we have been taught to “stay away from credit cards” rather than being smart with credit card use. We are not properly taught that money is just the tool, not the goal. The bottom line is we’re not taught financial literacy. Financial literacy is the possession of skills, knowledge, and behaviors that allow an individual to make informed decisions regarding money, as this will significantly improve our economic well-being.

We really, really need to start debunking money myths in the Black community and stop passing down outdated financial advice. As a mother, a Black mother who’s raising Black children, one of my main priorities is to make sure that my children’s future financial well-being is in great shape. The goal is financial freedom/wealth.

Here’s some outdated financial advice that Black people need to stop passing down:

Saving money under the mattress/shoebox money – Instead, save money in a high-yield savings account. These savings accounts offer benefits like a higher APY (annual percentage yield), which is the interest rate earned on a savings or investment account over a year, including compound interest, and there is the certainty of FDIC (Federal Deposit Insurance Corporation) insurance, you can’t lose your money because it’s not dependent on market fluctuations.
Avoiding debt – Instead, learn the difference between good debt and bad debt. Good debt, meaning it has the potential to increase your net worth or significantly enhance your life as a whole. Some examples of good debt include education, starting a business, and purchasing a home. Some examples of bad debt include high-interest personal loans, high-interest credit cards that don’t get paid off in time, car loans, cash advances and store credit cards.
Saving all your money – Instead, educate yourself on investing and then act on it. Due to inflation you actually lose money by not investing. You will beat inflation by investing your money. Investing will help you build wealth, give you flexibility, provide a retirement plan (early even), you have higher returns, you’ll save on taxes and you’ll be able to meet other financial goals faster. Once you do your research, invest more often than not and build a diversified portfolio.
Don’t use credit cards – Instead, learn how to properly use a credit card. How? Build credit with credit cards, keep balances low, pay them off monthly (tip: pay off more than the minimum), and don’t live above your means!

To leave you with one last thought, smart investing could be the key to financial freedom. Start investing now and share your financial literacy findings with your family and friends so that the Black community is more knowledgeable about building wealth. We too, deserve wealth.