lacked the knowledge necessary to make good investment decisions, compared to 46% of whites. And nearly three-quarters of black respondents say their lack of knowledge about investing is a reason why they don’t save more.
“Why did we do this poll? We started out thinking about how whenever we talked to people who should know about saving and investing, we were amazed that they didn’t,” says Hobson. “There must be more discussion in our community when it comes to investing. We have to talk about pursuing appropriate savings vehicles and have some very basic discussions about the power of compounding and why we’re not taking advantage of company 401(k) plans to the same degree as our white counterparts. We’re missing the
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Not surprisingly, Ariel found African Americans have considerably less wealth stockpiled than their white counterparts when taking into account total savings and investment. Of those surveyed, African Americans reported an average of $117,000 in investable as-sets (excluding real estate) compared to $224,000 for whites.
One of the conclusions Hobson drew from the survey was that many African Americans fear not having immediate access to funds should an emergency arise. “People always ask us ‘How will I know I’ll be able to get my money?’ They don’t think they’ll have ready access to their money and that was cited as a big reason why they’re not investing,” says Hobson. “But many feel if they put it in a bank they can go and get it exactly when it’s needed. The idea of saving for an emergency is very important to our community.”
Given the different life circumstances of many African Americans, David Swinton feels this wasn’t an unexpected finding. “Just the fact that you found blacks with only $30,000 as a median amount saved, including retirement, means their liquid assets are relatively small. And when you have that little you’re probably looking at it for emergencies. There may be no difference in knowledge, just a different stage in the wealth curve,” he argues. Swinton believes at the lower end of the income scale, it’s probably appropriate to be more concerned about liquidity. “If you’re investing for emergencies then you have to get those needs taken care of before you have the freedom to invest, to create this wealth in the future.”
Adds Margaret Simms: “It doesn’t do any good to approach their strategies as being irrational if in fact emergencies are more likely to occur in those households.” That aside, Simms says she was optimistic with the findings in the Ariel survey. “The report says two-thirds of African Americans in this group save or invest money, aside from retirement, at about $267 a month. And over 50% of them have money in the stock market. I have found those to be much more encouraging signs than we’ve been led to believe.”
Another finding: blacks and whites tend to differ on why they’re saving or investing. Ariel asked for the number one reason why those surveyed were investing. “Fifty-eight percent of whites said