In these times of economic turmoil and instability, many are tightening their purse strings across the nation. However, a large segment of the population continues to spend and live above their means — African Americans.
The simple fact is that African Americans do not save money and tend to spend before even considering putting a few coins away. The average African American’s savings level is about 1 percent of annual income when compared to other ethnic groups. This represents the percentage of disposable personal income held in retirement plans and liquid financial assets.
This is strange given the massive spending power that we have as a collective. African Americans spent $645.9 billion in 2002, an increase of 104 percent from 1990, according to Target Market News, a consumer market research and information company. In 2004, blacks’ spending power increased to $723 billion, according to U.S. consumer market data, and is currently estimated to be $913 billion.
If African American spending power were considered Gross Domestic Product (GDP) — the measure of a nation’s wealth, we would be ranked 13th, lower than Russia and higher than Mexico, Australia, Netherlands and South Korea. Given this accomplishment, why can’t we save some of this money?
We comprise less than 13 percent of the U.S. population, yet account for 30 percent of the country’s Scotch whisky consumption. Detroit, which is 80 percent African American, is the No. 1 market in the world for cognac consumption. According to Target Market, African American consumers spend a significant amount of their income on depreciable products such as $30 billion on clothes and around $15 billion on furniture to put into homes that are mostly rented. The average African American household has also increased its annual spending on entertainment by nearly 30 percent over the past few years.
Regardless of age or income, African Americans contribute less often, and less money to 401(k)s than whites and Asian-Americans. African American employees who earn $120,000 or more have saved $154,902 in their 401(k)s on average compared to $223,408 for whites. Even when comparing households with roughly the same incomes, whites saved nearly 20 percent more each month for retirement.
From income to homeownership to household wealth, we continue to lag behind whites, according to a United for a Fair Economy study. This report observed that a typical white family had six times the wealth of a black family in 2001 and that the gap is growing continuously, particularly with respect to savings and investing.
If we truly desire economic empowerment, then the burden is on us to save. We cannot copy the attitudes of celebrities like Ciara, who in a recent issue of Pride magazine stated that she spends “about $11,000 a month” on shoes and that she owns “maybe a thousand pairs.” –torrance stephens, ph.d.
