Banks, schools and churches in African-American communities are working to teach consumers real-life lessons about managing money in a bid to reduce a longstanding racial gap in financial literacy — and to boost economic development.
“African-American households generally don’t know as much about money and financial literacy compared to mainstream and upper-middle-class white communities,” says Teri Williams, president of OneUnited Bank, a black-owned bank that is on a mission to improve financial literacy in urban communities.
“If your mom kept her cash in a cookie jar or if she used a check casher, and you miss that introduction [to mainstream banking], you might find yourself at a disadvantage,” says Williams.
Historically, black communities have been underserved by conventional financial services. More than 20% of African-American households don’t have a bank account, compared to just under 8% of all U.S. households, according a Federal Deposit Insurance Corp. report. Not using a checking account and relying on high-fee substitutes like check cashers are symptoms of a general trend toward lower financial literacy in many African-American communities.
Financial literacy scores among black high school seniors were consistently about 20% lower than those of their white counterparts in a multiyear national study from the JumpStart Coalition for Personal Financial Literacy and State University of New York at Buffalo.
Another analysis found overspending and student loan debt to be more common among African-American millennials than white millennials; 28% of young black adults surveyed spend more than they earn and 49% had student loans, compared to 20% of white millennials who outspend their earnings and 32% with student loans, according to a 2014 report from the Financial Industry Regulatory Authority, an independent nonprofit.
Real-life money wisdom: ChexSystems and check cashers
To help children and adults learn about banking, managers at OneUnited — which is also a community development bank, with offices in Los Angeles, Boston and Miami — lead free workshops on subjects like rebuilding credit and understanding credit reports.
OneUnited sponsors an annual kids’ essay contest, awarding $1,000 savings accounts to students writing about how they apply financial lessons to their own lives. “We cannot think of ourselves as a bank in the traditional sense. We must think of providing financial services and financial literacy to the communities,” says Williams.
While working with schools, Williams noticed that the available children’s books on finances lacked relevance for kids in distressed neighborhoods. “Many had pictures of piggy banks in front of a white picket fence.”
To remedy this, she wrote a book herself: “I Got Bank!," featuring a 10-year-old African-American boy who learns “things kids need to know about, like check cashers, ChexSystems, how a low credit score can stop you from getting a loan — and even some of the darker side of money, like foreclosures and repossessions,” she says.
Some might argue that ChexSystems, an agency that tracks consumers’ bounced checks, missed fees and other bank account lapses, is too mature a subject for children, but Williams says that it’s real life. The boy in the story faces real challenges, including pressure from his mom and older brother, who want to spend the $2,000 he has saved at the bank.
More than 3,000 copies of "I Got Bank!" were donated to schools and libraries nationwide.
Economic gospel in African-American churches
Around the country, black religious leaders have partnered with banks to teach economic gospel through churches. “We have a captive audience in the black churches on Sunday morning. Millions of people hear the Gospel preached and also learn how to pay the bills, pay the mortgage and hold on to their housing,” says the Rev. Jonathan L. Weaver, pastor of Greater Mt. Nebo African Methodist Episcopal Church in Bowie, Maryland.
“Unfortunately, in so many pockets of the black community, we are so entrapped by credit cards. Many of us teach our members of our churches to be very, very careful so you don’t become imprisoned, but now, there is another new form of slavery. So we encourage our members to avoid the demons of credit-card debt and installment debt,” he says.
Compared to white high school seniors, African-Americans of the same age were more likely to use credit cards and less likely to have savings or a part-time job, the JumpStart study found.
“Through churches, we are teaching our people to watch how they spend their money. A lot are drowning in debt. We’ve got to teach our people how to get out of debt and not give their money away to the payday lenders,” says Michael Grant, president of the National Bankers Association, an industry group for minority banks. He has worked on financial education with a group of about 150 black churches, called the Collective Empowerment Group.
Ministers are in a strong position to teach about money. “Church leaders are inviting people to do financial education with the people who are let out of prisons, to teach them to become debt-free,” Grant says.
Weaver says he knows of roughly 600 other African-American churches working on financial literacy. “We are touching a good 450,000 people through all the churches,” he estimates.
By promoting financial literacy, black community leaders may enable the next generation to use money wisely and avoid financial missteps. Efforts to improve financial literacy can help level the playing field in a nation that has been economically unequal for so long.