This post is focused on educating Black and non-Black people about the causes of ethnicity wealth gaps and proposes solutions for the black community to build generational wealth. Please read with an open mind no matter your ethnicity.
Economic inequality and race are inextricably linked, and the statistics paint a stark picture of this painful truth.
For the Black community in the UK, this is a reality that cannot be ignored.
According to the ONS Wealth and Assets Survey (WAS), Black Africans and Caribbeans are worth, on a median basis, £34,300 and £85,900, only 10% and 27% of White British households respectively.
When compared to the median total wealth for a household in Great Britain of £286,600, those numbers become 12% and 30% respectively.
In addition, Resolution Foundation (RF) analysis of the ONS WAS data on financial fragility showed that 60% and 49% of Black Africans and Caribbeans households respectively, had less than £1,000 in savings compared to 28% for White British households.
These shocking statistics underscore the economic inequalities that Black people in the UK have been dealing with for generations.
It affects everything from the quality of education to career advancement, wealth creation opportunities and retirement outcomes.
So why is this the case?
What can Black people do to build wealth faster? And what examples can we look to from other ethnicities that have built wealth in the UK?
To start, it’s important to acknowledge historical issues of slavery, colonialism and institutional racism that have contributed to economic inequality.
Also, there are present-day structural inequalities in housing, employment and education that have made it harder for Black people to get access to the resources and opportunities for wealth creation.
Order our debut book, Financial Joy, a 10-week plan to help you Banish Debt, Grow Your Money and Unlock Financial Freedom.
It is written from our lived experience of achieving Financial Independence aged 34, including mortgage-free in 7 years.
Why Black People Struggle to Build Generational Wealth
Here are other contributors to the wealth disparities:
1. Immigration
Households headed by recent immigrants tend to have lower wealth outcomes because they have not had the time to accumulate wealth.
This is especially apparent when you compare the wealth of Black Africans versus people from India, who have mainly had the last 30 years to build wealth.
2. Educational Attainment and Poverty of Background
Chinese and Indians have the highest proportion of working adults educated to a degree level or higher in the UK.
Whilst 36% of Black Africans are educated at a degree level or above, this has not always translated into higher incomes.
Relative to other migrants, the Hong Kong Chinese, for example, often come from affluent backgrounds and have access to financial resources that can help them establish themselves in the UK.
They also often arrive in the UK with strong social networks that can provide them with job opportunities and other forms of support.
3. Lower Income
Whilst there has been progress in closing the ethnicity pay gaps, the gaps remain very wide.
According to DWP data, households of Indian ethnicity, for example, receive more than twice the average weekly earnings per adult for Black Caribbeans.
4. Property Ownership and Tenure
There is a strong positive correlation between property ownership and having higher wealth.
Over the last 25 years, total UK wealth has risen from 4x to 7x the level of GDP driven partly by falling interest rates, which led to capital and valuation gains in assets already held.
Indians, Pakistanis and White British people have benefitted the most with typical homeownership rates of around 70% to 80%, compared to 10% to 25% for Black Africans and 40% to 55% for Black Caribbeans according to DWP data.
In terms of wealth composition, Indians and Pakistanis have the biggest proportion of their wealth in net property, 47% and 57% respectively, compared to 33% and 38% for Black Africans and Caribbeans.
5. Sending Money “Back Home”
‘Black Tax’ refers to the financial burden that Black people in the UK (and other parts of the world) often face due to the cultural and familial expectation that they will provide financial support to their families and communities.
This support can take many forms, including paying for family members' education or helping to cover the cost of living expenses for extended family members.
Black Tax can have a significant impact on the wealth of Black people in the UK, as it can limit their ability to save and invest in their own financial futures.
It also leads to intergenerational poverty as parents can pass on the same expectations to their children, leading to a cycle of financial burden and limited wealth creation.
6. Debt Burden
Black households have a significantly higher ratio of debt to assets, leading to the cost of servicing debt often being a hindrance to building wealth.
7. Inheritance
ONS data shows that whilst White British and Indian people receive on average inheritance and gifts of £3,068 and £1,958, Black Africans and Caribbeans on average receive £1 and £778 respectively.
Inherited wealth exacerbates the wealth gap issue.
How Black People Can Build Generational Wealth
The government clearly needs to do much more to close these gaps.
But there is also plenty that Black people themselves can do to improve their financial prospects and start accumulating wealth.
1. Get Educated About Personal Finance
One of the most powerful ways of improving the financial situation of the Black community in the UK is to focus on financial education.
Every household needs to have a basic understanding of budgeting and saving as well as investing and debt management strategies.
In addition to the many resources online, there needs to be a more intentional effort on a community level to financially educate not only the adults of today but also their children.
Financial education should begin at home and we shouldn’t just wait for schools to teach us about money.
Recommended Book: Financial Joy: Banish Debt, Grow Your Money and Unlock Financial Freedom In 10 Weeks
2. Invest and Own Property
Property is important for building wealth long term.
If money is short for a deposit, people can start small and aim to pool resources with friends and family to invest in property together.
3. Lifestyle Simplification and Saving More
Adopting the mindset that wealth is mostly unseen and focusing on living a simpler lifestyle will help a lot of people live within their means and avoid lifestyles sponsored by expensive debt.
Prioritising saving and investing at least 10% to 20% per month into Stocks and Shares ISAs combined with Lifetime ISAs will help families build considerable wealth over time.
This provides some growth potential and liquidity (during times of loss of income) as Black people in the UK have the highest proportion of their wealth locked away in inaccessible pensions.
4. Create Business Opportunities to Earn More
Research by the Resolution Foundation found that all things being equal, a £1 increase in household income is associated with household wealth being £16 higher.
Entrepreneurship is a powerful tool for wealth creation, especially for Black people who have historically faced barriers in the job market.
Starting a business allows individuals to create their own opportunities and build their own wealth.
This is not without its challenges as we’ve seen with issues of access to funding for Black entrepreneurs.
Whilst we continue to work on improving funding outcomes for black entrepreneurs, we should keep learning from the examples of successful Indian and Pakistani business owners who have relied on family and community connections to secure funding and find customers.
5. Focus on Debt Freedom
With rising interest rates, debt will continue to be a big problem for families that are over-leveraged.
A big portion of disposable incomes for Black households should be focused on paying off expensive debts and where possible, overpaying on mortgages for better interest terms.
This mindset of investing in property coupled with repaying loans and not borrowing recklessly is a big part of what helped Pakistanis accumulate large property portfolios over the years.
6. Network and Collaboration
Trust is a huge issue in the black community.
There should be a focus on building long-lasting relationships with other Black people in the business world through networking events, professional organisations and mentorship opportunities.
7. Cultural Values and Community Support
Many ethnic minority communities have a strong sense of identity and culture that has helped them to build solidarity and support for one another.
Black people should look to their own cultural heritage and values as a source of strength and inspiration for building their own wealth.
Examples of such heritage and values include creativity, community, education, identity, spirituality and resilience.
The cultural heritage and values of Black people in the UK are rich and diverse, reflecting the unique experiences and contributions of people of African and Caribbean descent to British society.
Conclusion
Whilst it’s essential for policymakers to pay attention to current policies and trends in order to narrow the wealth gap, it’s also important for Black people to take practical steps to own their own stories and re-write the wealth narrative one household at a time.
Generational wealth is a possibility and our lived experience of achieving Financial Independence in our 30s even with many of the challenges highlighted, gives us hope that others can do the same too.
Order our debut book, Financial Joy, a 10-week plan to help you Banish Debt, Grow Your Money and Unlock Financial Freedom.
Financial Joy is accessible to everyone and it is available to you now, not later. Start today to create a life you love.
More posts to read on building generational wealth:
- 5 Signs You'll Become Wealthy 10 Years From Now
- If You Have £5,000 In The Bank, Do These 5 Things
- How Much Money Do I Need To Retire Comfortable?
Watch the video on version on building generational wealth:
What are your thoughts on the proposals to help the Black Community build generational wealth given current and historic challenges? We welcome thoughts and contributions from anyone of any ethnicity as a comment below.
Thanks for making such valid points. I am of Caribbean heritage and my parents worked very hard for their money and knew how to save but did not know about investing. As a black woman I find those more affluent in our community look down on those who have less and fail to engage with even their own family and friends on wealth creation.
Hi Mel, thank you for commenting. The point you make about learning to save rather than invest is so relatable. It’s also very sad to me that there are affluent black people who look down on those who have less and fail to engage. In our opinion, that’s borne out of scarcity based thinking as though we’re all fighting over one pie when in actual fact, given the evolution of technology, there are multiple pies out there an enough for everyone no matter their ethnicity to benefit from. Sharing the knowledge and opportunities is how we’ll all move forward, which is why we feel empowered to do the work that we do. Please share this blog post with others to engage with this topic.
This is so enlightening for me as a new immigrant and that point about learning about personal finance is key.
In my African culture money management was never taught nor seen, even worse is wealth building. Taking that initiative to learn and make changes is powerful and the lessons can be passed on.
The other part that moved me is that wealth is mostly not seen. Culturally, we connect success with liabilities and it takes a lot of self control to resist the urge to plunge into debt, just to prove that “you have made it.”
This is a great post and I will be getting you book. Well done
Glad to read that this post resonated with you. What you said about culturally connecting success with liabilities is so spot on! It does take a ton of self awareness and self control to do what’s counter-cultural. We appreciate you ordering our book too :). Do share the blog post or video with others:https://youtu.be/bjZ4rhHsJJ0?si=mQPRYNFKvdWDlM3A
Thank you so much Ken and Mary for what you are doing to educate and create awareness on creating generational wealth.
As an immigrant myself, there are a lot of issues which you have graciously highlighted above as reasons why Black Africans aren’t creating wealth.
One thing I identified with the most is the black tax, this was passed over to me by my parents, and even though I am in my twenties, I am expected to help those back home in Africa, it is an obligation rather than a choice and I think it’s mainly one of the hindrances in creating wealth.
I also think some black Africans are so complacent in improving and unlearning every bad habit of money they may have picked up from their family upbringing. Some would rather become single parents just to claim benefits (not stereotyping or anything but I have seen a couple of people do this) and not have the ambition and vision to create wealth for their children. Some are comfortable with the same job/position they have been in for over ten plus years. There needs to be a fire in our bones to do and achieve more with our lives.
It was sad to see when reading the top ten richest people in the UK and there was not a single African on the list,
We need to do more as a community, ignorance is not an excuse. I saw our money was an issue with my parents and I vowed to do more. I need to create that wealth for my children and their children.
Another issue I notice within my community is that talking about money is like a Taboo and we spiritualise everything. We make everything God’s responsibility not knowing He has also given us free will to make our own choice. We have to do our own part before He can bless us.
Thank you once again for touching this elephant in the room that African people have refused and still refused to address.
I feel so empowered and I hope to save all these great nuggets you have shared and pass it on to my children. They have to be better than we were.
Once again thank you for all you do(I know I have said it a lot). I can’t wait to have your book.
I like as you say wealth is unseen. I’m consciously building this mentality to not what to ‘show I have arrived’
In this society, there’s load of flashy albeit expensive things that can gulp income especially for immigrants who work long hours on study or work visas, the pressure is high to “reward ourselves” on pay day.
Having said the above, do you think, Blacks tend to have more kids without taking into account how expensive this would be?
Do you also find that Blacks are not quite as intentional in looking at how whom they marry could impact their finances on the long run?
Hi Anne
Thank you for sharing :). Good points made about the culture of showing “I’ve arrived”. To your specific questions, I think having children without assessing the real cost of raising a child is not just unique to the black community in diaspora. However, in Africa itself, I know that back in the day, having many children (as was the case in the UK and US, etc) was insurance for a family in a way. Almost like a future pension. My grandad, for example, had 2 official wives and had at least 20 children. But I think that culture is changing especially for us Black People in the UK, for example. Childcare is ridiculously expensive and people are shifting their attitudes to raising children. The Gen Z and Millennials look at having children very differently to the Baby Boomers, for example.
Also, to your point about being intentional about who they marry, I think this is across the board, although we could do a better job about assessing the impact of who we marry on our future outcomes.
I like as you say wealth is unseen. I’m consciously building this mentality to not what to ‘show I have arrived’
In this society, there’s load of flashy albeit expensive things that can gulp income especially for immigrants who work long hours on study or work visas, the pressure is high to “reward ourselves” on pay day.
Having said the above, do you think, Blacks tend to have more kids without taking into account how expensive this would be?
Do you also find that Blacks are not quite as intentional in looking at how whom they marry could impact their finances on the long run?
I like as you say wealth is unseen. I’m consciously building this mentality to not what to ‘show I have arrived’
In this society, there’s load of flashy albeit expensive things that can gulp income especially for immigrants who work long hours on study or work visas, the pressure is high to “reward ourselves” on pay day.
Having said the above, do you think, Blacks tend to have more kids without taking into account how expensive this would be?
Do you also find that Blacks are not quite as intentional in looking at how whom they marry could impact their finances on the long run?