Black Buying Power: The Good, the Bad, and the Ugly

 For the past few years, notable financial institutions such as Prudential Financial Research, Target Market News, Ariel Investments, and The Nielsen Company produces annual in-depth analysis on the spending habits of African Americans in the United States. With Black Buying (Spending) Power increasing every year and – in fact – recently surpassing $1 trillion, numbers such as these can no longer go unnoticed. This is certainly a demographic market to be reckoned with! However, the precision research and factual findings in these reports weren’t created necessarily to celebrate Black economic achievements but instead its purpose is to awaken and alert corporate American companies of the potential power of the Black consumer. So, many companies are positioning themselves to price, promote, and advertise strategically to compete for a share of the Black dollar unlike what they’ve done in the past.

According to the 2012 U.S. Census, Blacks in the U.S. represents 13.7% of the total population – approximately 43 million strong. With a buying power of $1 trillion, the GDP (gross domestic product) of African Americans residing in the U.S., it’s equivalent to being the 16th largest country in the world. Obviously, there are reasons to be optimistic as an African American and many would conclude that Blacks in America are doing quite well. But we know darn-gone-well, that’s entirely not the case. Some of these figures surely look impressive on paper but we need to do our part and see what we can learn from these reports to better our communities financially. 

To give you a bit more insight from these surveys and reports, we thought we would delve a little deeper to dissimulate: the good, the bad, and the ugly behind Black Buying Power in America. Besides buying behaviors, influences, and other financial motivators of African Americans and a strong buying power, our hope is to applaud the goodwork to improve the bad, and completely eliminate the ugly. Here’s what we came up with:

The Good:

  • The collective Black Buying Power of 43 million Blacks in the U.S. is $1 trillion.  Currently 13.7% of the U.S. population, there are projections of reaching $1.1 trillion by 2015.
  • The African American community is a growing economic force fueled by an increasingly powerful middle class. African American household income has increased for some: 35% of AA households earn $50,000 or more. Of that, 10% of households earn $100,000 or more
  • African Americans in the U.S. are more educated today than at any previous time in history
  • African Americans  remain significantly more confident about their financial situation than the general population
  • The top three financial priorities for African Americans are reducing debt, saving for retirement, and building an emergency savings account. These are great achievements if a strong game-plan is in place to attain
  • There is a significant increase in African American women graduating college, landing higher professional positions, and earning more. They play a key role in their households as the primary decision-maker and more often, primary breadwinner
  • African Americans give themselves a passing grade for managing money – including managing debt
  • African Americans are interested in investing (stocks, bonds, mutual funds, real estate…) and look to their communities, friends, and churches for financial knowledge
  • 4 in 5 African Americans who are eligible to participate in an employer-sponsored plan (401k, 403b, 457, SEP IRA,…) are enrolled
  • African Americans are more likely than the general population to require greater focus on financial literacy

 

The Bad:

  • Black Buying Power is really spending power. Blacks have the money but the question is, “what do we do with it once we get it?” We SPEND it!
  • Close to 37% of African American households earns less than $25,000, annually
  • Although American colleges/universities are graduating more African Americans these days, there are still an even number of black males in prison to those attending college
  • How confident can African Americans be about their financial situation when unemployment rates are high, student loan debt is over $1 trillion, there is less equity in our homes, high paying job are scarce, and most people are one paycheck from total disaster
  • African Americans tend to hold fewer financial products, invest more conservatively, borrow more from employer retirement plans, and lack relationships with financial professionals – all of which are barriers to achieving their financial goals (according to Prudential Financial)
  • More African American women work compared to the general population (other women groups) and are more likely to carry the financial burden on a single income
  • As with most Americans in the U.S., financial failures are the results of a severe lack of financial literacy and basic financial educational programs missing in our schools – literally from elementary thru college
  • African Americans seek financial advice from many of those who may not be adequately licensed to provide advice, such as: friends, TV shows, faith-based organizations, etc.
  • Approximately 26% of African Americans do not contribute as much as the employer match, are more than likely to invest more conservatively, and borrow more often from their plans than the general population
  • African Americans are open to financial advice but most financial institutions refuse to build trust, get involve, and assist in providing basic financial education to those in underserved communities

 

The Ugly:

  • The Black dollar does not circulate in the Black community for no more than 15 minutes.  We are the world’s most conspicuous spenders and in the process, enrich all other cultures but ourselves
  • Approximately 30% of African American households earn less than $15,000 annually. Why? More than likely, many work in part-time positions or in other lower-paying seasonal jobs. The typical Black household net worth is below currently $5,000
  • High school drop-out rates – especially for African American boys – are atrocious. In some major cities, high school drop-out rates are over 50%.The unemployment rate for Blacks in totality is 14.4% according to the Labor Department but for the younger Black generation, the unemployment rates are near 50%.
  • The African American community will continue to suffer because there is a severe lack of Black entrepreneurs, small businesses, and college graduates in the fields of science, technology, engineering, and mathematics to compete in America today
  • African Americans have a median household debt of $18,000-not including home mortgages, 50% of AA have less than $50,000 in their employer retirement accounts, and the majority have less than $2,000 in a savings account
  • Close to 70% of black children are born to unwed mothers in the U.S. today. The missing luxury of a dual income and a single parent taking on all of the financial responsibilities increases the likely hood of children growing up in poverty
  • In a capitalistic society like the U.S., entrepreneurship, wealth building, and economic development are the keys to success. African Americans have succeeded in just about every industry in America except economic empowerment & development. There is no power without economic power
  • Many companies and so-called financial experts prey on the poor and entice them to quick money schemes, touting short cuts to making it big in real estate, and into gambling and playing the lottery. Playing the lottery is practically a religion among the poor communities in the United States. According to The Consumerist, those earning less than $13,000 or less annually spend an astounding 9% of their income on lottery tickets. Many believe that their only way to wealth is living by chance
  • Small businesses employ 90% of employees in America today and approximately 49% of them do not offer an employer retirement plan at work. So, what’s going to happen to these employees as they prepare for retirement? The average retirement age for African Americans is 56, may receive a small pension, have little or no retirement plan, and next to nothing in a savings/money market account. The government and their employer’s are no longer responsible for its employee’s retirement. They are out of that business! But guess who’s now responsible for their own retirement plan
  • If African Americans will continue to spend most their money (discretionary money/$1 trillion), live paycheck-to-paycheck, avoid entrepreneurship opportunities, fail and not grasp fundamental basic financial tactics and strategies, we will summons to poverty and continue to enrich all other cultures but our own