Please share!
(This page may contain some affiliate links. Please see my disclaimer for more information.)

Last Updated February 16, 2024

Admit it…money gives you power and choices. However, when it comes to wealth, black Americans have less at nearly every stage of life from birth until death. The racial wealth gap in America is just as bad as they’ve been in the 1950s. In this article, find out how racial inequality translates to economic inequality in America and how you can change that in your own household.

FREE Budget Binder

What Is The Racial Wealth Gap In America?

There are large differences in income and wealth between racial groups in America. According to a 2016 analysis by the U.S. Federal Reserve, white families have a median net worth that is almost 10x higher than that of black households.

There are a lot of people who think money is colorblind or that we all have access to the same opportunities—we don’t. Let’s dive a little deeper and examine the racial wealth gap in America…

Why Is There A Racial Wealth Gap In America?

financial mistakes to avoid

Blacks earn less than white workers.

According to research from the Economic Policy Institute, blacks make 73.4 cents for every dollar earned by their white peers.

Even with a college degree, blacks aren’t getting paid the same. In cases where black and household heads have obtained a bachelor’s degree, their families’ median wealth of $68,000 is still lower than the $98,000 median wealth for white families where the head has no bachelor’s degree.

It’s worse if you’re a woman…and even worse if you’re a black woman. At every education level, women are paid consistently less than their male counterparts, and the average wage for a man with a college degree is higher than the average wage for a woman with an advanced degree. Black women, on average, earn 64 cents for every dollar a white man earns. 

Black college students aren’t finishing as often as white college students.

wealth gap In America school

According to data from the National Center for Education Statistics, the six-year completion rate through June 2017 for black students starting at a four-year institution was 38.9%, but for whites, it was 64.8%.

Starting but not finishing is a double edge sword because large numbers of these students end up with debt, but they don’t get the degree and the higher income that usually come with it. So it’s more important than ever to encourage our black college students to finish and get that degree!

Blacks have more student loan debt and more defaults.

According to a 2018 analysis by Judith Scott-Clayton, an associate professor at Columbia University, black students tend to borrow significantly more than their white peers (maybe because for white students their parents can afford to help them with their college tuition). Furthermore, black students are more likely to default on their loans. 

Black students who earned bachelor’s degrees accumulated more debt than whites. They borrowed $21,149 on average, nearly twice as much as whites, by the time they left school.

Furthermore, 21% of black graduates with bachelor’s degrees default. That’s more than five times the rate of their white peers (4%).

Debt Tracker

White families earn over 2X that of black families.

Black families with a new baby have a median household income of $36,300, according to an analysis of the 2018 census data by the Center on Poverty & Social Policy. For white families, it was more than twice as much—$80,000. 

If you’re starting with less, it makes things for your child’s future that much harder and widens the wealth gap in America.

Black families are behind their white peers in homeownership.

cut household expenses

The home is the largest asset for many American families, which may help build wealth over time. Paying down a mortgage often serves as a forced savings plan, enabling families to build equity that they can tap in retirement or leave to their heirs. 

According to the Urban Institute in about 72% of white households owned homes, compared with nearly 41.7% of blacks.

In 1960, nearly 65% of whites owned homes, compared with 38.1% of blacks. “The gap in the homeownership rate between black and white families in the U.S. is bigger today than it was when it was legal to refuse to sell someone a home because of the color of their skin,” the Urban Institute wrote.

I am a big proponent of home ownership, and real estate investing is a major reason why I’m financially free today. So, if you’re just getting started on your financial journey, make owning a home one of your financial goals.

If you’ve never bought a home before, you can read my detailed article “10 Tips For Buying Your First Home” to help you get started.

Monthly Budget Worksheet

Blacks are less likely to have retirement accounts and have less in them when they do.

According to the most recent Federal Reserve Survey of Consumer Finances, 60% of white families have at least one retirement account, while just 34% of black families do.

The median balance in their retirement account was $151,000 for whites and $46,100 for blacks.

Saving for retirement as a black person is so important for several reasons:

  1. You’re able to take care of yourself financially when you can no longer work.
  2. You won’t become a financial burden to your children or other family members. Remember, they’re already at a financial disadvantage compared to their white peers, so you don’t want to add to that.
  3. Your children may have an opportunity to inherit wealth when you die—which will give them a much needed financial boost.

Blacks leave less to the next generation when they die.

wealth gap In America

The imbalance in homeownership and retirement accounts makes it unsurprising that white households are more likely to receive an inheritance than black ones. 

I’ve personally experienced this when my father died of cancer. I was in my early 20s and broke when my father died. And not only did I have to deal with the grief of losing a parent, but I had to figure out how I was going to pay for his funeral expenses because he died leaving nothing.

According to research from two Fed economists, 23% of white families reported having received an inheritance compared to just 9% of black families. So white families are two and a half times more likely to leave money for their children.

And when there is an inheritance, whites received more too. The median inheritance in white families was $56,217, while blacks received $38,224—also not surprising given the income inequality. 

So even if white families had fallen behind in the first part of adulthood, they had a better chance of catching up with a single windfall. And those white families who are already doing better widen the wealth gap further when a relative dies. 

At that point, the process begins again for their kids—and their kids’ kids.

Is The Wealth Gap Increasing?

It seems as though the racial wealth gap in America is increasing—or at the very least still stagnant since Juneteenth (June 19, 1865, when the Federal Troops arrived in Galveston, Texas to free the last remaining slaves). 

Between 1983 and 2013, white households saw their wealth increased by 14%. But during the same period, black household wealth declined 75%. In 1863, black Americans owned .5% of the national wealth—today it’s just over 1.5%.

It’s crazy to see these kinds of statistics in 2024. It’s clear we still have a lot further to go to close the racial wealth gap in America.

How To Close The Wealth Gap In Your Household?

write financial goals

You now know the racial wealth gap in America is a BIG problem. So what can you do about it?

While there can be numerous policies put in place by the government to try and close the racial wealth gap, it starts with you and what you can do as an individual to help yourself.

Here are some things you can do to close the wealth gap in your household:

1. Increase Your Financial Literacy 

Improving your financial education is one of the first steps you can take to closing the racial wealth gap. As a woman or a person of color, making a commitment to improving your finances is one way you can break down inequality and instill power.

Sign up to get the secret password to my FREE Resource Library. In my Resource Library, I share some of my favorite personal finance books and educational tools. It’s also loaded with more than 20 pages of easy to print worksheets, checklists, debt payoff tools, investment tools, money-saving tips, and more.

2. Make Financial Goals For Yourself

Educating yourself is the first step, but to truly see results you have to begin to take action. Therefore, you need to make financial goals for yourself.

It’s so important to make financial goals because it increases your chances of achieving your dreams. Those with goals are 10x more likely to succeed. Not only do people with goals achieve them, but they also achieve them much faster than those who do not have financial goals.

The reason for that is because goals give you more focus, allows you to track your progress, and help you stay motivated to achieve your task.

To get started, you can download this FREE Daily Goal Planner. The Daily Goal Planner will help you make a to-do list, stay organized, and prioritize your daily tasks.

Daily Goal Planner

The only way to achieve your goals is to make sure you do one small thing every day to get you closer to your dreams—and this printable is designed to assist you with that.

If you need help setting financial goals, read my detailed article “How To Set Realistic Financial Goals You Can Actually Accomplish.”

3. Work On Increasing Your Net Worth

One of the best ways to dismantle the wealth gap in your household is to increase your net worth. Your net worth is simply your assets (things of value) minus your liabilities (money you owe). In other words, the simple formula is: 

Net Worth = (what you OWN) – (what you OWE).

The easiest ways to increase your net worth is to:

  1. Save more money,
  2. Pay down debt, and
  3. Grow wealth through investing.

However, to accomplish any of those things is you need to make a budget and manage your money intentionally.

Knowing how to manage your money is fundamental to building wealth—so it’s crucial that you have a functioning budget first. If you’re just getting started with making a budget, you can use this FREE Monthly Budget Printable

If you want something a little more advance, I personally use these budget templates every month to track my spending. It is the system I’m currently using for my budget, and it has helped me save over 50% of my income every month.

Monthly Budget Excel Template
My Monthly Budget Template

You can read my detailed article “How To Use A Monthly and Yearly Household Budget Spreadsheet” to learn more about how to set up a budget that actually works.

4. Empower Others

Toni Morrison once said, “If you have some power, then your job is to empower somebody else.” As a black woman, I understand that the odds are NOT in my favor, but I’ve been blessed enough to beat those odds—and that’s why I started this blog Dollars Plus Sense.

I knew once I was able to improve my finances, I had a duty to help other women and people of color that may have struggled with money as I did. My goal was (and still is) to inspire and help women improve their finances.

So I call on you to do the same thing.

Once you have increased your financial literacy, share your knowledge with your children and your community. Support them and uplift them with their financial goals.

Finally, support women and minority-owned businesses. As you support their businesses, you not only help them but the generations after them. And when people of color achieve financial success, they are in a much better position to help others.

I reminds me of a line from one of my favorite rappers and billionaire mogul Jay-Z…he said “I can’t help the poor if I’m one of them. So I got rich and gave back, to me that’s the win/win.

So true!

free Resource Library


The racial wealth gap in America is a glaring problem. As black people, we need to be mindful of this and try our best to close this wealth gap by getting our financial house in order. Start by increasing your financial literacy and making financial goals for yourself. Work on increasing your net worth, and make sure you empower others when you’re in a position to do so.

Related Articles:

If you want to remember this article, pin it to your favorite Pinterest board.