African Americans Making Financial Progress but Still Facing Financial Challenges
According to Prudential’s 2013 "African American Financial Experience" study, the African American community is continuing to make financial progress and to feel confident about the future, with a confidence score significantly higher than the general population. But this community is still facing significant challenges, including debt, competing financial priorities, and greater support of family.
Financial ProgressThe African American community is a growing economic force fueled by an increasingly powerful middle class.
- Middle Class and Affluent Continue to Grow
- Approximately four in 10 surveyed have an annual household income of $75,000 or more, and nearly 25% earn six figures.
- About one-third (35%) of African Americans surveyed have $50,000 or more in financial assets, including savings, investments, and employer-sponsored retirement accounts.
- Personal Progress Made in Difficult Economic Times
- Despite feelings that the U.S. economic downturn is still ongoing, primarily due to high unemployment, half of African Americans feel better off financially than a year ago, while only 19% feel worse.
- More Confidence and Preparedness than General Population
- Forty-six percent of African Americans compared with 35% of the general population feel very well prepared to make financial decisions.
- Compared with the general population, African Americans feel significantly more confident (42% v. 30%) and optimistic (30% v. 21%) when making decisions about their money. Consistent with this confidence, African Americans feel less uncertain (22% v. 31%), anxious (18% v. 28%), and intimidated (5% v. 10%) about financial decisions.
Financial ChallengesThe emerging middle class shares many of the financial challenges of the larger community, including debt reduction, supporting more family members on a single income, and achieving retirement security.
- Reducing Debt
- African Americans are significantly more likely to have some type of debt (94%) compared with the general population (82%). Credit card debt, student loan debt, and personal loans are all significantly higher in the African American community.
- Non-mortgage debt, particularly student loan debt, is significantly higher than the general population. College-educated African Americans report student loan debt at a ratio of nearly 2:1 compared with all college-educated Americans.
- One in four African Americans has felt anxiety or depression as a result of debt.
- Supporting Family Members
- African Americans are more likely to live in female-headed households. Two-thirds of African American women surveyed are working compared with 58% of women in the general population. African American women are less likely than the general population to have a spouse or partner present (60% v. 74%), and thus more likely to carry the financial responsibilities of the household on a single income.
- Multi-generational households–with parents, adult children, and grandparents–are more common among African Americans. Moreover, African American families are also particularly likely to provide support for extended families regardless of whether they live under the same roof. About six in ten African Americans provide financial support to someone else. They are significantly more likely than the general population to financially support parents and other relatives.
- The so-called “sandwich generation”–those supporting both younger and older family members–is especially prominent in the African American community. One-third of African Americans are financially supporting children under 18 or grandchildren, and 9% are supporting parents or grandparents–both higher than the general population (25% and 4%, respectively).
- Achieving Retirement Security
- One in five African Americans says that concern about their ability to retire keeps them up at night, and one in four is worried about the future of Social Security.
- On average, African Americans expect to–and do–retire earlier than the general population, despite lower retirement savings. One in four non-retired African Americans expects to retire before age 60, compared to one in five of the general population. The expectation of an earlier retirement aligns with the experience of the current retirees surveyed; the average retirement age for African Americans (56) is significantly lower than for the general population (59).
- Nearly half of African Americans have a workplace retirement plan, such as a 401(k), and eight in 10 eligible to contribute are doing so. Yet, many continue to contribute less than their employer match or take loans from their plan.
“The African American Financial Experience” survey was conducted March 7 - 19, 2013. We surveyed 1,153 Americans who identify as African American or Black and 471 general population Americans on a broad range of financial topics. All participants met the following criteria:
- Age 25 - 70
- Household income of $25,000 or more
- Some involvement in household financial decisions
The findings are representative of the population described above, subject to a margin of sampling error of +/- 5% for African Americans and +/- 6% for the general population.
The Prudential Insurance Company of America, Newark, NJ