Study: 10 trends in African American financial health

By Jessica Mazzola | NJ Advance Media for NJ.com
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on August 11, 2015

A Prudential Financial survey surveyed African Americans across the country about their financial experiences.

 

NEWARK — African Americans are increasingly financially stable, but are not planning for the future, a new Prudential Financial study has found. 

In its third "African American Financial Experience" survey, the Newark-based company questioned 1,043 African Americans across the country in an attempt to assess their financial health. Overall, officials with the company said the study shows an improving financial situation.

"This study paints a picture of an increasingly financially savvy and affluent African American community," Mammen Verghis, a marketing vice president with the company, said in a release about the study. 

"We are seeing a group that is financially confident."

However, the study also reported a need for greater retirement planning among the population.

"Gaps in long-term retirement planning, including not taking advantage of financial and investment tools, may hinder (African Americans') ability to build long-term wealth," the company concluded in a release about the study.

Ten of the top takeaways from the study include:

  1. Positive outlook: 54 percent of African American respondents said their overall financial situation is better than that of their parents when they were their age.
  2. Getting better: 56 percent of African Americans surveyed feel better off now compared to five years ago. About 58 percent of those surveyed believe their family's next generation will have a better financial situation than they do. Only 46 percent of the general population reported feeling this way.
  3. Preparedness: A slight majority – 52 percent – of African Americans feel they are well-prepared to make financial decisions. That's compared to only 40 percent of the general population.
  4. Split decisions: Respondents were asked to grade themselves in terms of their financial knowledge. The results were split, with relatively high percentages grading themselves well in terms of managing household budgets, managing debt, managing money, and life insurance protection. On the flip side, relatively low percentages gave themselves high grades for knowledge of investing, planning for wealth transfer or leaving money to the next generation, and saving for a child's education.
  5. Savers: Of the African Americans who said they were well-prepared to make wise financial decisions, 59 percent consider themselves "savers." Twenty-nine percent said they were "spenders, and 11 percent called themselves "investors. The relatively low percentage of self-described investors among this group suggests that opportunities exist for encouraging financially very well-prepared African Americans to consider how investments may support their long-term goals," the study reads.
  6. Plans: Employer-sponsored retirement plans are offered to African Americans and general population employees at an equal rate, to 74 percent of respondents. The availability of these benefits trends upward with income level in both cases.
  7. Contributions: Among African Americans who are offered employer retirement plans, 74 percent contribute a percentage of their salary to it – that's significantly less than the 85 percent of the general population who do.
  8. Debt: About the same percentage of African Americans as members of the general population reported having personal debt, 79 and 81 percent, respectively.
  9. Professionals: Only 14 percent of African Americans and 26 percent of the U.S. general population reported currently working with a financial professional.
  10. Goals: African Americans reported two new long-term goals this year – maintaining one's lifestyle in retirement, and not becoming a financial burden to others.

The 2015 survey marks the third Prudential has conducted over the past four years. See the full report here.

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