Photo by Kelly Fournier on Unsplash
How much is financial wellness tied to financial literacy? Well, first, what is the true definition of financial literacy. Financial literacy is knowledge and understanding that enables sound financial decision making and effective management of personal finances. Those who have formal education, coupled with high incomes and a grasp on financial education, tend to have a higher financial literacy rate.
However, for Black women, the story is dramatically different. Black women are faced with a unique set of challenges that impacts their increased awareness of understanding the everyday nuances of their financial health. And because of this, the divide to wealth creation between Black women and their White counterparts are staggering.
The Personal Finance Index is also known as the P-Fin Index, which is conducted by GFLEC and TIAA institute provides new insights on Black financial literacy:
Only 38% of the answers were correct by African Americans compared to 55% of white people.
Their best score was in borrowing and managing debt.
The lowest score was in comprehending risk and uncertainty, insuring, investing, and go-to information source.
Insuring and understanding is a troubling part of financial literacy.
Functional financial literacy saves people from rainy days or debts.
Although a bit complex, there are many reasons for this widened gap. The reasons include the gender wage gap that hits Black women the hardest. Although Black women are the most educated demographic, student loan debt prevents them from saving and investing like other groups. Institutionalized racism tightly grips Black women, preventing them from moving forward. Coupled with the lack of recognition in the workforce, etc., solidifying your financial wellness may not be at the top of your list.
Most know that focusing on financial wellness is essential, but many Black women aren't sure how to get started or where to look for assistance. Another issue is the lack of financial literacy that is catered to Black and Brown women. Financial literacy is the necessary next step to having a sense of control and understanding of your daily finances and building wealth. When emergencies do occur, you have the resources to manage them. When you're ready to start that business, you know where and how to access information. Therefore, when you have financial freedom, it allows you to make the best choices without sacrificing your mental health in the process.
One of Black Girl Venture's pillars is to provide access to financial capital and educational resources to enhance all Black and Brown founders' economic well-being in business. This is why we partnered with Experian North America to bring Black and Brown founders the financial, educational tools that they need to increase their financial literacy. Experian has been a longtime supporter of consumer financial literacy through its strategic partnerships and credit chats. So, we are very excited about this ongoing partnership and this ongoing commitment to increase the financial knowledge of as many Black and Brown women founders as possible.
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