African Americans demonstrate continued optimism when it comes to finances, due to growing affluence, Prudential Financial found in its biannual “African American Financial Experience” report. However, many are not taking advantage of financial and investment tools, which may hinder long-term wealth accumulation.
Two increasingly prevalent financial priorities for African Americans are maintaining their lifestyle in retirement and not becoming a financial burden to others, Prudential says.
“This study paints a picture of an increasingly financially savvy and affluent African American community,” says Mammen Verghis, vice president, multicultural marketing for Prudential. “We are seeing a group that is financially confident, focused on service and open to receive assistance from professionals who can help them move closer to financial security.”
More than half of African Americans (56%) say they are better off financially than they were five years ago, and 54% believe they are better off than their parents were at their age. They expect financial gains will continue to build, with 58% saying they expect the next generation to be better off financially, compared with 46% of the general population.
Just over half (52%) think they are capable of making smart financial decisions, compared to 40% of the general population. However, Prudential finds far more African Americans (59%) describe themselves as savers as opposed to investors (11%), indicating an opportunity for additional financial education.
Among African Americans who are offered an employer-sponsored retirement plan, 74% contribute to it, compared with 85% of the general population.
Asked what their top financial priority is, 51% of survey respondents said having enough money to maintain their current lifestyle in retirement. Not becoming a financial burden to loved ones is another priority, which Prudential found interesting as nearly two-thirds of survey respondents say they are a caregiver for a loved one. Among this group, individuals spend an average of 20.7 hours a week on caregiving, compared to 14.6 hours among the general population.
NEXT: Debt remains a focus
Paying down debt is also a top financial priority for 50% of African Americans, as a large majority of respondents report having at least one type of debt, the most common being credit card debt.
Nearly 40% of African American veterans said they were exposed to a good education about financial topics once they transitioned into civilian life. Although 71% of African American veterans feel very well prepared to make financial decisions and have a positive outlook on their financial situation, only 38% use the Veteran Service organization as a financial resource, with most relying on family for financial information.
Thirty-nine percent of African Americans have had contact with a financial adviser, but just over one in 10 works with a financial professional regularly, compared with 26% of the general population. The reasons why African Americans are hesitant to work with a financial professional mirror those of the general population and include the belief they have insufficient assets, a preference to manage finances themselves and perceived high fees associated with advisers.
“Each year we conduct this survey deepens our commitment to reaching diverse communities,” says Michele Green, vice president and chief diversity officer at Prudential. “We understand the important of meeting the needs of diverse consumers in relevant and authentic ways. That means helping to bridge gaps of financial knowledge and increasing access to financial professionals who can provide the advice needed to help individuals and families overcome saving and investing challenges, and to build wealth.”
Findings of this year’s survey mirror those of Prudential’s last “African American Financial Experience” survey, in 2013. This year’s survey was conducted by GfK KnowledgePanel. The full results of the survey can be downloaded here.