What will it take to close the wealth gap in America? The answer might surprise you
As the U.S. wealth gap continues to widen, Black financial experts envision paths for Black people to create meaningful wealth.
In the United States, where wealth inequality continues to be higher than in any other developed country, the wealth gap has reached seven figures.
According to a recent report by the Urban Institute, while Asian-American households, on average, have nearly $2 million in wealth, white U.S. households, on average, have over $1 million more in wealth than Black and Hispanic households.
Household income dipped and fluctuated for just about everyone during the pandemic and has only recently shown signs of growing again since nationwide shutdowns lifted. However, the wealth gap has only widened. In 2022, the Urban Institute reported the average Black household had roughly $211,000 in wealth, while the average Hispanic household had roughly $227,544.
There are myriad systemic barriers plaguing Black Americans’ ability to create and maintain wealth. From building generational wealth for others through our forced labor as this nation first formed to centuries of discriminatory practices, including job discrimination and pay disparity, the deck largely remains stacked against Black Americans.
“That gap is not there entirely for a lack of us wanting it to be closed,” Rahkim Sabree, a Black financial therapist and accredited financial counselor told theGrio.
He continued, “There’s a lot of the structural design that was created…where even if opportunities appear to be similar and access to information appears to be universal, there are still so many barriers psychologically, spiritually, physically, socially, economically — I mean, you name it, it’s there — to us being in the same place with somebody who has a legacy of privilege.”
Even so, there is hope for Black Americans’ ability to create meaningful wealth and even let generational wealth take root. After delving into financial trauma because of his own background, Sabree now approaches his financial consulting from a therapeutic angle.
“I came from a background where we didn’t talk a lot about money,” he shared. “And usually, when we did talk about money, there were painful associations.”
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From a childhood growing up on food stamps to working in the banking industry to eventually launching his own financial consultancy, Sabree understands firsthand the complexities of deep-seated trauma that can inform many people’s decision-making with money. He also understands that regardless of who you are, you can experience financial trauma. From his perspective, a capitalist culture like the U.S. that promotes consumerism 24/7 sets a lot of us up to be financially traumatized.
“We’re constantly being fed advertisements and marketing that say, ‘You need this in order to be somebody.’ ‘You need this in order to be healthy.’ ‘You need this in order to be fit.’ ‘You need this in order to beat that diet.’ And so, we’re trying to fill those needs based on the messaging that we’re bombarded with all day, every day,” Sabree posited. “That is a traumatic experience.”
He added, “In a way, we’re all experiencing financial trauma all the time. It really just kind of depends on what the lens is that you’re looking at that trauma through.”
The financial adviser added that recognizing trauma and seeking out the tools or professionals that can help one navigate through it is ultimately the key. Doing so can “help you be conscious of these stressors, your reaction to these stressors, and how to make more informed, more intentional decisions as it relates to your money now, in the future, and for future generations,” he advised.
Tax and wealth transfer attorney Devin Blackburn also stresses the importance of gaining financial literacy and a genuine understanding of how to make money work for you. While she admits there are myriad systemic barriers to closing the gap, she considers a “lack of fundamental understanding around how money works” to be among the top.
“I think part of the wealth gap comes from just having a lack of understanding of really how money works,” Blackburn told theGrio.
Blackburn said she likes to think of an old Albert Einstein quote: “Compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn’t pays it.”
“If you don’t understand the power of compounding interest,” she continued. “Your money is never going to make money; you’re always going to be in arrears paying off debt.”
The other major component Blackburn identified as fueling the wealth gap’s persistence is that despite many more Black people earning top degrees, enabling them to work in high-earning fields, many are starting out “in the red” or with high amounts of educational debt. If a person is spending the first 10 to 15 years of their career paying off debt, they’re less likely to invest meaningfully as a young adult and less likely to buy a house, missing out on that time to let assets grow, she noted.
Blackburn says even more issues arise when people are “not thinking generationally.”
“Think about it: Most times when somebody’s grandmother dies, uncle dies, aunt dies, or parent dies, you’re left with good manners, some morals, and maybe a recipe. If you were not left with a will trust distribution, even a little savings account or insurance policy, that’s not embedded or ingrained in you,” she explained.
She continued, “So if you’re not thinking generationally, you are not thinking about ‘How should I steward my finances?’ ‘How should I store my wealth in order to be able to leave something?’”
Far too often, Blackburn said, folks think if they’re not a multimillionaire they don’t need something like an estate plan. As a result, too often their descendants may miss out on crucial opportunities to gain generational wealth.
Aside from potentially uncomfortable conversations, taking stock of one’s financial picture can lead to pessimism or even bring up feelings of shame for past mistakes or lack of knowledge. Sabree advises folks to push past it.
“Sometimes [shame] will surface; multiple times it will surface, but understand that the choices that you’ve made up to this point are choices that you felt were the best thing for you in that moment,” he said. “Of course, with the wisdom of experience and hindsight being 20/20, you can look at that and kind of cringe, but you didn’t know what the future [would look] like. Now you get to draw a line in the sand and make more intentional choices around how you navigate that — and that’s the best part of waking up every day.”
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