Improving Financial Wellness for Black Americans

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Author

Alison Salka, Ph.D.
Principal Research Consultant
LIMRA and LOMA

February 2025

Black History Month is a time to reflect on the remarkable contributions of Black Americans to the nation’s history, culture and progress. It is also an opportunity to address challenges that continue to affect Black communities. One of these challenges is financial wellness, an essential aspect of well-being that profoundly affects individuals, families and communities. For Black Americans, improving financial wellness is not just about achieving personal goals; it’s a step toward addressing broader economic disparities and fostering equity.

Financial wellness refers to the state of one's financial health, including the ability to manage day-to-day finances, cope with financial emergencies, and plan for future financial goals. It's not merely about assets or income but rather a sense of security and freedom in financial decision making. LIMRA defines financial wellness as being confident in your financial situation, able to withstand unexpected expenses, and enjoying a financially secure future.

To quantify this concept, LIMRA developed the Financial Wellness Index, which creates a wellness score that can be assessed over time and compared across different demographic segments. This index serves as a tool to measure and understand financial wellness, aiding in the development of programs and strategies to improve financial health among all segments of consumers.

Challenges Faced by Black Americans

Despite progress, Black Americans continue to face significant financial challenges. Historical and systemic factors have contributed to a persistent racial wealth gap. Data from the indicates that the average White family's wealth is seven times higher than that of the average Black family. LIMRA research finds that Black Americans are less likely than other demographic groups to feel confident in their ability to withstand an unexpected expense of $500 or more.

Figure 1. Very Confident in Ability to Withstand Unexpected Expense of $500 or More

Source: LIMRA Financial Wellness Research, 2024

As of 2024, Black individuals experience higher unemployment rates and lower wages compared to their White counterparts, regardless of educational attainment. On average, Black individuals earn 20 percent less than their White counterparts, according to the Federation of Protestant Welfare Agencies (FPWA). Lower income means fewer resources and can often lead to financial stress. LIMRA research finds that 17 percent of Black American employees said they often feel distracted at work because of personal financial worries. Fewer than 10 percent of White Americans had the same level of worry.

Financial literacy is another area of concern. Studies show that financial literacy levels are generally lower among Black Americans compared to Whites, even within similar demographic subgroups. This gap can hinder effective financial decision making and long-term wealth accumulation.

Strategies to Improve Financial Wellness

Addressing these challenges and improving financial wellness requires a multifaceted approach.

Enhancing financial literacy is a foundational step. Community programs and educational initiatives can provide resources tailored to the specific needs of Black Americans. Increasing access to financial education can lead to improved financial capability and decisions. Education by itself is not enough, though.

Encouraging investment participation is another vital step. There’s a notable gap in investment participation, with only 39 percent of Black Americans having money in the stock market compared to 66 percent of White Americans. Encouraging and facilitating investment can be a pathway to wealth accumulation. Access to retirement plans at work is an easy path to start investing.

Promoting homeownership is another component of building wealth. However, Black Americans have lower rates of homeownership compared to other racial groups. Addressing barriers to homeownership is important. In addition, supporting entrepreneurship can provide economic empowerment and community development.

The Role of Employers

Employers play a pivotal role in enhancing the financial wellness of their employees, including those from Black communities. Since financial wellness is a key aspect of overall employee wellness, benefits play an important role in supporting it. Benefits that directly help with financial wellness include health insurance, a retirement plan, paid time off and wellness programs.

Implementing financial wellness programs that provide financial education, counseling and planning tools can help employees manage their finances more effectively. In recent years, wellness services have been growing. The pandemic highlighted the growing need for help. Newer benefits developed to meet these needs include benefits like emergency savings assistance, Employee Assistance Programs (EAPs) and student loan assistance. LIMRA research finds that employees believe their employers should offer them services to help them address financial stress.

Figure 2. Employers Should Offer Services to Help Address/Reduce Employees' Financial Stress

Percent Strongly Agree

More importantly, these programs have been shown to improve employee particularly among men and younger employees.

Long-term financial security means the ability to have a secure retirement. Providing access to retirement plans and encouraging participation through employer matching can aid in long-term financial security. Notably, Black employees participate in employer-sponsored retirement plans at lower rates than White employees, highlighting the need for targeted encouragement and support.

Supporting Employee Resource Groups (ERGs) can drive benefit adoption and boost engagement, particularly when promoting financial literacy through tailored educational content and events.

Improving financial wellness among Black Americans is a complex but attainable goal. It requires concerted efforts from individuals, communities, employers and policymakers to address challenges and promote opportunities for financial growth and security. Black History Month is a meaningful time to champion these efforts and honor the resilience and potential of Black communities. By focusing on education and benefits, we can work toward closing the financial wellness gap.