How We Can Do Better at Building Black Wealth

In honor of Black History Month, we reflect on the past, present and future state of Black wealth.

We at Betterment dedicate our time and energy with the goal to make people’s lives better through investing. So when deciding how best to join the chorus of Black empowerment that builds each February during Black History Month, we decided to focus on generational wealth. At the end of the day, we believe that wealth-building is one of the most powerful tools to live a better life and lead a path for generations to come. 

The uncomfortable truth behind the racial wealth gap

We can’t fully appreciate the importance of creating generational wealth for Black people without acknowledging our collective past and examining where it has left us. It’s no secret that rising out of slavery did not create equality for Black Americans in 1865. Over a century and a half later, there are still enormous wealth disparities between Black and non-Black households. According to the 2019 Survey of Consumer Finances, the average wealth of a White family is over 7x than that of a Black family. 

Many factors have contributed to this gap–and continue to persist–including years of housing discrimination, credit inequality, mass incarceration, inaccessible healthcare and education, and lower paying jobs. The domino effect of these factors leaves Black families with little to inherit and often less to pass on. Tania Brown, an Army veteran, Certified Financial Planner®️, and owner of FinanciallyConfidentMom.com guest authored an article for us with more about this.

So now what? The racial wealth gap is clearly not just a Black problem, nor can it be solved by individual actions alone. Organizations like the National Advisory Council on Eliminating the Black-White Wealth Gap are at the forefront of developing proposals to address the issue systemically. Ideas range from job creation to baby bonds to reparations. Ultimately, we all have a part in building strong Black financial futures.

Here at Betterment, we’re committed to supporting individuals through our investing products and our voices. In that spirit, we’ve gathered resources in the section below to help chip away at the gap through personal finance decisions. 

Personal steps to building Black wealth

Despite systemic barriers, there are still tangible strategies that Black Americans can apply to help boost their wealth:

Make the most of your savings

Before parking your cash in a standard savings account (or worse…your mattress), consider a Cash Reserve account. Think of it as an alternative option with none of the common drawbacks like transfer limits, minimums, and fees.1

Create multiple streams of income

You can reward yourself for the hard work at your day job by letting your money work for you. Passive income is earned through sources like interest and dividends from stocks with minimal effort. Automated investing can make earning passive income even simpler.

Align your investments to your goals

Whether you’re an expert or completely new to investing, a goal-based approach can help you personalize your financial plan. Once you’ve thought about your short-term and long-term needs, you can set an investment strategy that aligns with your values and risk tolerance. 

Here are articles written by our own Bryan Stiger, CFP®, that can also help you get your financial house in order:

How to support or invest in organizations working to improve Black lives

Centuries of racism, institutional discrimination and lack of wealth building opportunities still impact the Black community today. Here are five organizations you can donate to today who are working to address these social and economic gaps:

If you’re a Betterment customer, you have two additional avenues for empowering like-minded organizations:

  • Donate eligible shares to any of our partner charities through our Charitable Giving feature. Here are three of those partner charities working to improve Black lives:
    • NAACP Empowerment Programs
    • Envision Freedom Fund 
    • American Civil Liberties Union (ACLU)
  • Invest in companies actively working toward minority empowerment through our Socially Responsible Investing portfolios. 

What does Black wealth look like?

We recognize that wealth is different for everyone. For Black communities, we believe wealth looks like empowerment, equity and the means to pass something meaningful from one generation to the next. We hope that you’ll join us this month to celebrate Black excellence and get involved in building Black wealth.

Black at Betterment is one of eight employee-led groups at Betterment working to amplify underrepresented voices. Its mission in particular is to “celebrate and elevate Black excellence within ourselves, Betterment, and our community at large by strengthening our relationships, amplifying our voices, and equipping ourselves with the tools necessary to succeed.”

1For Cash Reserve (“CR”), Betterment LLC only receives compensation from our program banks; Betterment LLC and Betterment Securities do not charge fees on your CR balance. While there is no minimum balance required to be maintained, the minimum amount to open the account is $10.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.