Why generational wealth is uniquely difficult for Black American families

BY Nii Ntreh June 14, 2024 1:17 PM EDT
Black Family
A Black Family. Photo Credit: U.S. Census Bureau

Generational wealth represents progress over time, and it offers prospects and stability for descendants. The popular (and non-academic) discourse on generational wealth often posits that leaving a considerable amount of capital is the only way to guarantee the best possible future for one’s progenies. But this view is often bourne of reactionary politics, one that despairs at the thought of public investments and government (thanks to Ronald Reagan and all the intellectuals who propped his neoliberalism, Americans have an inordinate amount of suspicion of government, even by developed countries’ standards).

However, contrary to the popular maxim, we all do not observe the same 24 hours, and neither do we all have the same potential. For America’s Black people, building generational wealth remains challenging. When compared to white families, Black families tend to accumulate significantly less wealth.

Within the corporate landscape, Black employees encounter numerous systemic obstacles, such as being underrepresented in rapidly expanding, higher-paying sectors, facing lower chances of career progression and higher turnover rates in frontline and entry-level positions, experiencing limited representation in executive roles, and lacking sponsorship opportunities.

Despite comprising approximately 12.9% of the American labor force, Black employees earn a mere 9.6% of the total wages in the United States. Presently, the median annual income for Black workers is roughly 30% or $10,000 lower than that of their white counterparts. This disparity holds immense consequences for household financial stability, consumption patterns, and the capacity to accumulate wealth.

In 2022, the Federal Reserve Bank of St. Louis reported a significant racial wealth disparity in the United States. It revealed that for every $1 of wealth possessed by a white family, a Black family only had $0.25. The path to rectifying this is also plagued with structural gaps. For instance, Black families encounter distinct and discriminatory obstacles in pursuit of financial prosperity, from acquiring homes to establishing and running businesses.

To address the racial wealth gap and foster generational wealth for Black Americans, it is crucial to acknowledge additional barriers beyond mere work and wage disparities that hinder progress.


The credit and home-buying process has unjustly deprived numerous individuals of African descent of equal opportunities due to racial or ethnic discrimination.

Black homeowners also face the challenge of diminished property values, leading to reduced profits from home sales and limited access to financial resources such as home equity loans. According to a recent study conducted by the Brookings Institute in 2021, homes owned by Black individuals are undervalued by approximately 23%. This significant undervaluation amounts to a staggering $156 billion in lost wealth across the United States.


Black Americans are also more prone than their white counterparts to being underbanked or depending on alternative financial solutions outside the traditional banking system. A 2021 study from Boston Consulting Group indicates that “Black and Latinx households represent 64% of the country’s unbanked and 47% of its underbanked households.”

Credit Score Differences

According to a 2022 study by the Urban Institute, “young adults in majority-Black and majority-Hispanic communities are more likely than their peers in majority-white communities to begin their adulthood with lower average credit scores. They are also more likely to see their credit scores decline as they age.”

These disparities are the results of decades of discriminatory policies that have denied communities of color access and equity.

What will work?

The allure of going your own way against systemic faults should be vanishing by now. Individualism does not work against America’s enameled history. Black people may need to re-acquaint themselves with the spirit of community that invigorated the Civil Rights Era of the 1960s. Breaking down the barriers to wealth creation goes beyond personal achievements and encompasses what communities can do for themselves.

Through strategic investments in community initiatives, African-American families can play a vital role in fostering the overall prosperity of their neighborhoods. Initiatives such as the African-American Community Fund and San Diego Foundation prioritize and allocate resources towards community-driven, groundbreaking endeavors like education, entrepreneurship, affordable housing, and other areas that promote racial equality and long-term wealth for Black individuals. By dedicating themselves to community development, they ensure that economic prosperity benefits everyone.

The focus of strategic financial planning recognizes the importance of acquiring assets. Among these, homeownership has demonstrated its ability to provide stability by offering a place to live and a valuable asset that increases in value over time. By implementing meticulous management and making strategic acquisitions, Black families can not only secure comfortable homes but also establish a lasting real estate heritage that continues to appreciate.

Investments in markets are another crucial aspect of strategic financial planning. It is imperative to have a comprehensive understanding of the stock market and the fundamentals of investment strategies to establish long-lasting wealth. Black families can leverage diverse investment options to increase wealth, providing a safety net for unforeseen occurrences and future goals.

Lastly, entrepreneurship also plays a crucial role in strategic financial planning as it allows for the diversification of income streams. Successful Black entrepreneurs have exemplified the significance of establishing successful businesses, not only in terms of generating income but also in creating a foundation for long-term wealth.