About this series
This article, inspired by Deloitte research, is part of a series in which five Black-owned publications around the United States explore the key factors that contribute to racial and generational gaps in acquiring wealth.
As Nashira Lynton looked back at her childhood, she remembered how her relationship with money stemmed from the lifestyle and mindset of her immigrant parents.
Lynton’s parents came to the United States from Panama in Central America in the 1980s. They worked hard to provide for their family but conversations about long-term wealth building were non-existent.
“I grew up with this scarcity mindset. My parents worked hard enough to survive and took whatever job they could get, and it was very limiting. I didn’t want that for myself. I wanted a life of abundance,” she said. “I carried that mindset throughout college. I went to school, racked up over $60,000 in debt, and in my early 20s, I became a single mom in New York living paycheck-to-paycheck and using credit cards to supplement my income.
To become “financially healthy” Lynton said that it’s deeper than how much money you have in the bank, but rather discovering the emotional factors and fears that keep people from achieving control over their finances.
“I was making money decisions from an emotional place, and in order for me to break those this cycle I had to learn about my family’s financial system,” Lynton said. “When you grow up in proximity to poverty it plays a role in how you navigate your financial well-being in the future.”
There are many Black millennials who share Lynton’s story, and the climb to financial freedom gets more challenging as they tackle rising rent and home costs, groceries, gas, student loan debt, and other bills that delay their efforts to generate wealth over time.
The intersection of race and age
According to a 2019 Federal Reserve survey, white families have a median wealth of $188,200, compared with $36,100 for Hispanic families and just $24,100 for Black families. For this look at the most typical household within each racial group, wealth is defined as the difference between the families’ gross assets, which includes holdings like real estate and stock portfolios, and their liabilities or debt.
A recent economic analysis by Deloitte found that “on average, white households added US$34,400 to their median real wealth between 2010 and 2019, while Hispanic households added US$17,100 and Black households only US$5,300.”
Deloitte’s analysis also found that millennials and Gen Z households have higher incomes but lower wealth relative to similarly aged Gen Xers and Baby Boomers. It turns out that “millennials’ real median net worth was only US$13,900 in 2019 compared to US$19,200 for similarly aged Gen-Xers in 2004 and US$15,600 for baby boomers in 1989.”
Essentially, Black millennials exist at the intersection of both race- and age-related wealth gaps.
Overcoming financial mistrust
“It’s a tough time for young people to invest in retirement strategies fully,” said Daniel Harvey, a professor of finance and director of the Financial Planning Program at Prairie View A&M University.
The rise of the gig economy means that some workers don’t have access to employer-sponsored retirement accounts and they might also be dealing with racial disparities in student loan debt.
“Not only are Black millennials drowning in debt, but it’s also becoming a challenge to prioritize money to invest,” Harvey said. “The key to conquering this starts with financial literacy.”
Harvey also said that likely because of mistrust, young people might be less interested in investing assets in traditional methods such as 401k plans to build wealth because they are usually the first people in their families to provide real financial stability. As a result, there is a sense of responsibility to take care of family financial burdens rather than focusing on wealth-building for the individual.
Ainjel McDonald’s financial education began when she learned that acquiring a degree and getting a “good job” earned her just enough money to live paycheck-to-paycheck. With student loans, personal loans and a car loan hanging over her head, McDonald quickly realized she needed to create a strategy to live a life of financial independence.
Now, as a successful management consultant for an IT consulting firm in Houston, McDonald can happily reflect on getting kicked out of college, enlisting in the military, going back to college and eventually building a multi-six-figure net worth by her early 30s.
“I remember when I first entered into consulting, and I was conversing with my Black counterparts who were living paycheck-to-paycheck, versus the conversations I had with white people who were talking about vacation homes,” McDonald said. “It was unfortunate for me to be in a space and feeling like I was way behind my peers in my knowledge of finances. We went to school, got the job, got the income, but what’s the missing link?”
I never really learned anything about credit until college. My mother was too afraid of debt. I learned early on that if you can’t afford it, then don’t buy it. But it wasn’t until I got accepted into college that I realized my mother didn’t have enough money saved for me to go. After getting kicked out of school, entering the Air National Guard, re-enrolling back to college, and entering the workforce, I needed a strategy for an abundant life.
Ainjel McDonald
Lessons learned
McDonald is a first-generation Jamaican-American — her parents migrated to the United States in the 1980s — and she grew up in what she describes as a lower middle-class family. Her early experience with finances involved seeing her parents buy products on layaway. Her mother budgeted well and didn’t have debt because she never owned credit cards. And collective economics was a common practice because she had a large family.
“I never really learned anything about credit until college,” McDonald said. “My mother was too afraid of debt. I learned early on that if you can’t afford it, then don’t buy it. But it wasn’t until I got accepted into college that I realized my mother didn’t have enough money saved for me to go. After getting kicked out of school, entering the Air National Guard, re-enrolling back to college and entering the workforce, I needed a strategy for an abundant life.”
She started her journey to financial independence by being frugal and prioritizing savings and investments. Her goal is to retire early and live off small withdrawals from accumulated accounts.
As for Lynton, not only was she able to pay of more than $60,000 of student debt but she became a financial therapist and an accredited financial counselor empowering other women to develop healthy financial mindsets.
“I’ve learned that building a healthy mindset is a journey. Limiting beliefs will show up when problems arise,” she said. “Understand your thoughts around money, and why you think the way you do. Ask yourself if these thoughts are serving a purpose in your life.”
Richard Bumbury was born in Guyana, South America, and moved to a low-income neighborhood in Brooklyn. As a child, he didn’t understand what it meant to have wealth because of his environment. Images of Black wealth appeared exclusive to athletes and entertainers. It wasn’t until late into his adulthood that he discovered how to build wealth. He is now a six-figure-earning software engineer — and he did so without a college degree.
“I taught myself how to write software while working full-time at a job I didn’t like,” Bumbury said. “I woke up at 3 a.m. every day and studied between three to four hours before going to work. But it was what I had to do to get out of my economic situation. I didn’t go to college because my family couldn’t afford it, and I didn’t want to burden my parents. I didn’t know of (financial) aid opportunities, so I skipped that part and went straight to work.”
It took him a year and a half of studying before he quit his job and began working in tech full-time. His big financial break came when he was introduced to restricted stock units (RSUs) while working as a software engineer at a tech company. RSUs are a form of stock-based compensation that some employers might provide as a benefit to their employees.
“This is the first time somebody is giving me access to more than just paying me money for the time I work. They are also giving me an asset that can grow. If you use it correctly, it can turn into generational wealth,” Bumbury said. “My struggle at that point was no one in my circle knew what RSUs were, and I didn’t have enough financial literacy to understand the best way to leverage these tools.”
Closing the investment gap
An Ariel Investments and Charles Schwab survey found that the investment gap between Black and white Americans narrowed in 2022. There was a significant drop-off among white investors (down eight percentage points from 71% in 2020) and a small increase among Black investors (up three percentage points from 55% in 2020).
Despite that tiny overall bump among Black investors, the survey also found that stock market participation is higher among younger Black millennials, with 68% of Black respondents under 40 reporting that they’re investing compared to 57% of younger white investors.
The COVID-19 pandemic created a rush of enthusiasm for stocks and investing among Black Americans, according to the survey results. Thanks to easy access to smartphones and apps, we can buy and sell stocks with one click — no fees or financial gatekeeping included. Technology can provide an unprecedented opportunity to help grow wealth and have your skin in the game in a financial system.
Nde Nkimbeng is the CEO and co-founder of Propertunity Partners LLC, a company that helps engineers build wealth passively through apartment investing. As a first-generation Cameroonian-American, he credits his father with planting the seed of property investment at an early age.
“I remember when I first started making money in college and my dad would say ‘In America you need to have something on the side because corporate America will suck you dry’,” he said. “During the 2008 recession, my parents were laid off, and we lived in a duplex that my dad turned into a triplex and the tenants were basically paying for the mortgage. That situation put things into perspective for me.”
As an engineer, Nkimbeng was a high-paid earner who wanted to utilize his money well beyond just working hard and investing in employer-sponsored retirement vehicles. He realized that his parents didn’t have room to make mistakes or a major support system if their plans failed, so Nkimbeng has learned to take more risks early on.
“I didn’t quit my job to be an entrepreneur, but I considered my job as an angel investor and use that money to make more money,” Nkimbeng said. “I’m in my 20s, and I want to use this time to try new things. I’ve lost money in this journey but I’ve learned to rebound and try again, because if I fail, I have the support system of my family and that in itself is a privilege.”
Making a game plan
Bumbury said his “aha” moment motivated him to start building a tech startup that serves as an alternative to the stock exchange — and helps eliminate the wealth gap. The goal is to meet people where they are and create an easily understandable financial market for economically underrepresented or under-resourced groups using entertainment and pop culture.
He also believes that with job-hopping becoming a norm, the expectation to work a certain number of years at a company to enjoy retirement savings later in life isn’t the mentality of Millennials today.
“Many young people now don’t want to wait until they’re 60 to enjoy the lifestyle they want,” Bumbury said. “I think the system is broken, and we need a new one. That’s why I’m working to create something different.”
Meanwhile, McDonald is on a journey to help others as the founder of a personal finance blog. As a money coach, she helps Millennials and Gen-Z professionals save, invest and develop strategies for financial independence.
For long-term wealth, McDonald suggests starting with the fundamentals: create a budget, build a 3- to 6-month emergency fund, automate expenses, and invest in employer-sponsored and individual retirement accounts.
Harvey agrees. He recommends that people first understand their short- and long-term goals and list their assets, liabilities, expenses and cash flow.
Next, he recommends they evaluate their risk profile and willingness to take risks and have adequate savings and insurance on necessities — including home, health and vehicle — in case of losses. Finally, he recommends that people seek a professional financial advisor for additional support.
“Knowledge is your best protection. Understand your goals and your risk profile,” he said. “Before you can invest, you need to set yourself up for success.”
