Published: March 2008

Financial Education in the African American Community

Consumer Action attended the first Financial Literacy Roundtable focused on financial education in the black community. The roundtable was hosted by the Department of Treasury in March 2008.

The U.S. Treasury Department held a discussion on March 4, 2008 on financial education in African-American communities. U.S. Deputy Assistant Secretary for Financial Education Dan Iannicola, Jr. chaired and moderated a series of expert panels on the best ways to provide financial education to African-American communities.

The roundtable was the third in a series of four discussions being held as part of the Financial Literacy and Education Commission's implementation of the National Strategy for Financial Literacy. For more information about the Commission, visit its website, My Money.

Consumer Action's Deputy Director for National Priorities Ruth Susswein attended the roundtable and reports on some of the information presented there:

Dr. Charles Betsy of Howard University spoke about his research into how inaccurate knowledge about the credit industry hinders people's access to credit. (Based on a Freddie Mac survey, 2000)

Jim Carr of the National Community Reinvestment Coalition (NCRC) spoke of the need to give real incentives to people, such as individual deposit accounts from the earned income tax credit. Carr discussed costly consumer misconceptions. One example he cited is consumers believe that mortgage brokers operate in a mortgage seeker's best interest. He spoke mostly about the need for regulatory reform of the mortgage industry and a ban on some predatory lending practices (such as yield spread premiums).

William Cheeks (formerly with Experian) explained that 35% of a person's FICO credit score is based on payment history, 30% on credit card debt vs. available credit, 15% on account history, 10% on the mix of credit held by the consumer and a small percentage on how often credit is applied for.

Kelvin Boston, host of the PBS program Moneywise, showed an interview with Andrew Young, American civil rights activist, former U.S. congressman and mayor of Atlanta, Georgia. Young revealed that he had never learned how to handle credit and that this lack of knowledge got him in trouble. He was saved by a banker friend who provided him with information about how to manage credit.

Boston and others talked about the need to promite "economic empowerment" in the African American community by providing solid financial literacy information. Participants discussed current educational resources that are available for free, including HSBC Bank's "Your Money Counts" and the Federal Deposit Insurance Corporation's MoneySmart materials.

Theodore R. Daniels, President and CEO of the Society for Financial Education, explained the Society's credit management seminars on college campuses for freshmen. Farrah Gray, the 23-year-old author of the book "Reallionaire," who made his first million at age 14, cited the bleak statistic that 40% of American households spend 110% of their income in order to live.

Financial aid manager Carmella Cohen-Perry from a small North Carolina college told participants that the average student loan in four years is $19,000 and over five to six years debts more commonly reach $37,000. Participants suggested that students could use secured credit cards or prepaid cards as a way of building credit or avoiding trouble with credit cards. According to a financial literacy professor, the University of Central Oklahoma is the only historically black college to mandate a financial literacy class, after the student body experienced problems with credit card debt and related suicides.

Retirement and Savings

Charles Schwab & Company and Ariel Mutual Funds have conducted an annual survey of black investors. The number of blacks invested in the stock market had crept up to 74% by 2002, but in 2007 participation had dropped to 57%. (Click here to download a PDF with study details.)

It was mentioned that the fast food eatery McDonalds had started a required 401K enrollment for its managers. It gave the managers a one percent raise, deposited the extra earnings into a 401K and continues to match employee contributions. The program has resulted in 95% of managers maintaining retirement savings accounts.

The day ended with a philanthropic entrepreneur and businessman John Hope Bryant, founder of Operation HOPE, and member of President Bush's new Financial Literacy Council. Hope, author of the book "Banking on Our Future" spoke passionately about how the black community has to "make smart sexy," and how "we created a political power base before we had an economic power base"—so financial education is overdue.

Lead Organization

Department of Treasury

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