There is no doubt that the decline of the housing market and the great recession that followed took its toll on the pocketbooks of most Americans, but a study released today by the Pew Research Center found that it had a far more negative impact on the wealth of minorities than whites.

The study, which was conducted using newly available data from 2009, revealed that median wealth of white households is 20 times greater than that of black households and 18 times more than Hispanic households, the largest gap in the quarter century since the government first published such information.

Household wealth, or net worth, is the accumulated sum of assets minus the sum of debt, and is different from household income, which is the inflow of wages and other sources of earning. From 2005 to 2009, median wealth fell by 53 percent among black households, to about $5,677, compared to a 16 percent decline among white households, who have an average net worth of $113,149.

With unemployment at record levels in the African-American community, and the economy at a virtual standstill, this staggering divide has the potential to become an abysmal chasm. What can black households do to turn these disheartening statistics into opportunities to advance their financial strategies and increase their family’s net worth?

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It’s important to examine some of the factors that led to this wealth gap to gain a better understanding of what can be done to address this issue. Historically, minority families have bought into the notion that the best way to accumulate wealth is by purchasing a home, according to Haidee Cabusora, the director of services at The Financial Clinic, a nonprofit financial development organization dedicated to helping the working poor in New York City. In the early 2000s, many black and Hispanic families attempted to build their assets by buying homes, which went down in value once the bubble burst. These families went into the recession that followed the housing market crash with fewer assets, which led them to seek out other sources of income, including credit cards with high interest rates, and this increased their debt to asset ratios.

“Unfortunately, the new study findings don’t surprise me at all,” adds Cabusora. “Another cause of the wealth gap is that lower income families, which are disproportionally black and Hispanic, tend to move jobs more often, and don’t have the opportunity to participate in important work savings plans like 401(k) and other matching programs offered by employers, which allow individuals to build assets more quickly.”

In February, a survey conducted by Washington Post, the Kaiser Family Foundation and Harvard University Poll found that that just 46 percent of blacks and 32 percent of Hispanics have IRAs, 401Ks or similar accounts, compared to the nearly 65 percent of white Americans who have them.

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Only one in four African-Americans and just one in six Hispanics own stocks, bonds or mutual funds compared to about half of white workers, and if the patterns hold, a large number of the nation’s minority retirees could be faced with tough choices during their twilight years. Cabusora says that signing up for retirement savings plans is not only a wise idea, but it is essential to building household wealth over an extended period of time, and that minority families should consider this as a option for increasing their net worth.

A recent study from the National Bureau of Economic Research found that 46 percent of Americans who said their household couldn’t come up with $2,000 in 30 days without possessions, which means that many families are having trouble paying for day-to-day expenses, and the last thing on their minds could be saving for retirement. If contributing to a 401(k) is not a viable option, there are other simple steps that families can take to build their assets and ensure that they have a savings reserve for emergencies and special purchases like college tuition and retirement in the future.
Mae Watson Grote, who works with Cabusora and is the founder and executive director of The Financial Clinic, says that one of the key factors in increasing a family’s wealth is coming up with a savings strategy that is tied to short- and long-term goals. The amount that families put away doesn’t matter, Watson Grote adds, as all that is important is to develop a pattern of saving that is consistent and grows over a period of time. She suggests that families start with taking the change in their pockets and throwing it into a jar, and then increasing their contribution to five dollars a week after a couple of months. This will help them to have better saving habits, and eventually their safety net will grow.

“I’ve often hear a lot about how low-income people can’t save, but the Financial Clinic’s research shows that the only way that they can get out of their vicious cycle is to save and to plan for the future,” she says. “Simple steps like opening up a bank account or signing up for direct deposit and having some of your income go directly into savings can also help you to stop spending and start saving. The key is to change your mentality so that you can be equipped to handle any type of financial situation. Saving is not an amount, it is an activity.”

To date, the Financial Clinic has assisted more than 6,000 individuals in New York City, resulting in over $2.3 million in cash value back into their clients’ pockets. An important component of ensuring their clients’ long-term financial success is helping people realize that there are resources out there that can help them manage their debts. And because paying down debt is another component to increasing a family’s median wealth, Cabusora and Watson Grote suggest that people seek out the resources available to help them pay their bills.

“We had one client who came in here who was homeless and came in during tax time,” said Cabusora. “She hadn’t run a credit check in years, and when we pulled her history, we found that she had a large amount of outstanding debt. She had no savings and had a student loan debt on her record and we helped her get it discharged, and get her on the road to financial recovery.

Now, she is getting ready to enter school in the fall. I tell this story to let others know that there are resources out there to help them deal with their financial situations. Families should do their research and seek assistance if necessary, and not lose hope when paying off their debt and saving for their futures.”

In addition to saving, families should also take advantage of resources available to them during tax time, like purchasing savings bonds and utilizing the earned income credits for families when filing their tax returns, which is a refundable federal income tax credit for low to moderate income working individuals and families. Savings bonds can be purchased when filing tax returns and are eligible for an educational tax benefit.

Another way to put an end to the cycle of disparity between minority and white households is to educate the next generation about the importance of spending and saving smarter. Teaching teenagers about the role of money in their lives is something that is absolutely necessary, and will allow them to have a healthy relationship with money in the years to come, says author and psychotherapist Kate Levinson, who leads workshops for families to explore their emotional relationship to money.

“Isn’t it strange that we never are taught about money in school?” said Levinson. “And often we aren’t taught about it in our home either. Money is so hard to talk about and there’s often a taboo about discussing it with our family members, so we don’t know anything about dealing with it. Talking to your kids about saving and spending and allowing them to learn about financial planning early in life and the difference between want and need will help them to develop a healthy relationship with money.”

Developing a healthy relationship with money, and understanding the consequences of spending and the importance of saving, no matter what the amount, may be just what is needed to help put minority families back on the road to net worth recovery and possibly start bridging the wealth disparity gap created by the treacherous recession and housing market crash.