Financial literacy is important knowledge for anyone to have. It lays the foundation of our relationship with money and fosters lifelong financial skills, including budgeting, investing and money management.
Unfortunately, hundreds of thousands of people lack financial literacy, putting them at a disadvantage when it comes securing student loans, investing or owning a home.
Defining Financial Literacy
According to the federal Government Accounting Office, financial literacy is:
“The ability to make informed judgments and to take effective actions regarding the current and future use and management of money. It includes the ability to understand financial choices, plan for the future, spend wisely, and manage the challenges associated with life events such as a job loss, saving for retirement, or paying for a child’s education.”
High-quality financial education is critical to help people successfully navigate financial challenges, capitalize on opportunities to invest, build resilience and recover from economic setbacks.
The Impact on Black Communities
Based on a recent study by George Washington University, despite being major contributors to the American economy, African Americans “lag behind others – particularly whites – in their financial wellness.” Numerous economic indicators contribute to this disparity including median household income, net worth and student-loan debt, as highlighted in the study.
Additionally, it becomes more difficult for people of color to attain financial equality, as they are up against the generational wealth building that white families share while they remain at a lower income and quality of life generation after generation. Systemic issues such as “redlining,” or the discriminatory practice of denying home purchases or loans based on race or ethnicity, has had a huge impact on families. These practices continue to contribute to intergenerational wealth and asset inequality.
The San Diego Black Homebuyers Program
Fortunately there are programs to help Black families buy their first home and start down the road to building intergenerational wealth for families who never had the opportunity before.
Locally, The San Diego Foundation, LISC San Diego and the Urban League of San Diego County have joined together to launch the San Diego Black Homebuyers Program. The objective of the program is to improve the racial wealth gap in San Diego by investing in generational wealth-building opportunities through Black home ownership. As part of the program, prospective homeowners must complete financial literacy training to help plan for a financially stable future.
Education is Key
Personal finance is not taught in schools, so for some young people, they may never be exposed to budgeting, banking, investing and other income-building tools and practices. Not knowing the importance of personal financial management often contributes to people from under-resourced communities remaining in a cycle of poverty.
Starting financial literacy education at a young age has its benefits and it is widely believed that financial literacy education is the missing link for closing the Black wealth gap in the U.S. According to a report from CNBC, financial literacy education in schools has shown to help students avoid payday loans, have better credit outcomes and reduce private student loan balances and credit card debt as they get older.
In the report, Prince George’s Public Schools CEO, Monica Goldson feels that while it’s important for everyone to have financial knowledge, it’s even more critical for those who are economically disadvantaged and likely know less about these issues.
“It is our hope that this financial education will empower students to make their money work for them and ultimately will be a catalyst toward upward mobility,” said Goldson.
The Black Community Investment Fund
The San Diego Foundation understands the importance of financial literacy and investing in our communities. That’s why we started The Black Community Investment Fund. This fund “prioritizes and invests in community-led, innovative efforts that increase racial equity and generational wealth for Black San Diegans.”
Co-founded by the Central San Diego Black Chamber of Commerce and The San Diego Foundation, the fund is led by a group of San Diego leaders who “provide guidance, leadership and diverse subject matter expertise.” With over $3 million granted and committed, The Black Community Investment Fund-supported programs include:
- The San Diego Black Homebuyers program, which requires financial literacy to qualify for grants towards down payments
- Urban Business Resource Center, a program of the Central San Diego Black Chamber of Commerce that supports Black entrepreneurs and business owners
- Education and workforce training programs with the San Diego Workforce Partnership and Neighborhood House Association
Learn more about the Black Community Investment Fund.