Dr. Martin Luther King Jr. made a plea back in 1966 to close the racial wealth gap between white and black America, calling this discrepancy a “structural part of the economy.”
Now, despite nearly 60 years of supposed progress, the racial wealth and financial wellness gap remains largely unmoved. In fact, with rampant inflation and rising interest rates, this reality is only on the rise.
As a country, we have the power to close this gap. Some of the nation’s most successful and innovative employers are increasingly focused on providing financial wellness initiatives for their workforce. Designing an intentional, tailored curriculum for people of color who are often at the lower end of the financial wellness spectrum—and collaborating on the design and delivery of the content in partnership with employee resource groups (ERGs)—is a proven way to address financial inequality head-on.
The Racial Wealth Gap in America
With a long history of racial discrimination in this country, it’s no surprise that income inequality has followed and remained an issue through today. According to the Federal Reserve, the wealth gap has widened notably since the 1980s. In fact, the average black and Hispanic household earns approximately half as much as the average white household—and holds only about 15% to 20% as much net wealth. And while we’ve seen some gains through homeownership in the past couple of years, it will still take outsize efforts to both maintain and gain ground in the fight to bridge wealth gaps.
Just last year alone, black populations were 38% less likely to have a positive cash flow than their white counterparts—an unfortunate reality shared by Hispanic Americans, as well. Numbers like this preclude most Americans of color from accumulating wealth, let alone passing it along to future generations. One major solution to improving cash flow—with the ultimate goal of accumulating and transferring wealth to future generations and helping those generations optimize the proceeds—lies heavily within financial wellness.
With diversity, equity, and inclusion (DEI) initiatives much more commonplace in the private sector, employers are stepping up as a source of support. However, the amount of impact they have is tied to the level of intentionality behind these initiatives.
If decision-makers are siloed or experience a large disconnect between what they perceive as needed versus what their workforce is actually affected by, then the initiative will fall flat, no matter how ambitious. Likewise, just looking at workforce data is insufficient. Instead, executives must take the next step to understand the emotional insights behind the data and the broader situation impacting their employees.
Working with ERGs Can Help Close This Gap
Collaborating with ERGs can make all the difference. Their members often relate to each other through shared identities and experiences, creating the opportunity to safely address taboo topics like money in motivating and solution-oriented spaces.
My team worked with a client’s thriving network of active ERGs, including groups for Hispanic and Latino and black employees. Together with HR, benefits, and ERG leadership, we developed customized communications and events to move the needle. The outcomes over 6 months were incredible: 97% of participants said they felt better prepared to make a financial decision, and confidence in retirement preparedness doubled. Additionally, there was a 25% decrease among participants who said they felt high financial stress.
To further build trust and credibility, the base content was developed and delivered by CFP® Professional financial coaches from the communities it was created for. As one coach summarized it, “Developing and delivering tailored programming for ERGs is one of the most meaningful parts of my job. The opportunity to use my lived experience to relate to the populations that need it most, and to help them succeed, is huge.”
We are replicating the experience across our client base and seeing similarly positive results. It’s proving that intentional DEI-based initiatives can actually bring us closer to closing the racial wealth gap.
Intentional Solutions Can Make the Difference
Now is the time for companies to be intentional about providing solutions for the audiences they are trying to effect change within. Even though the current economic situation is working against us, employers can take deliberate steps to support their workers’ financial well-being. The answer lies in bringing a diverse group of stakeholders to the table; working in partnership toward shared, data-informed, deliberately set outcomes; and supporting employees with the information, tools, and support they deserve.
Together we can work to close the financial wellness gap—for the sake of our past, present, and future generations. We have the avenue and experience and must continue to push employers and partners to continue the momentum.
Laura Stamps is Head of Strategy, DEI Engagement Financial Wellbeing at Financial Finesse, an independent provider of unbiased workplace financial wellness coaching programs.