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How Financial Education is Key to Reducing the Racial Wealth Gap

Family taking financial education courses together

The racial wealth gap in the United States has been a persistent issue for decades due to systemic racism and discriminatory policies. However, until 1980, incremental (albeit small) progress was being made, but over the last 40 years, the gap has actually widened slightly. This cannot be attributed simply to income levels. Research shows household and generational wealth results from much more than salaries. Real estate and investments contribute substantial economic benefits. For example, between 1950 and 2010, black households held about 7% of their wealth in stock equity, while white families held 18%. Homeownership rates show similar disparities. In 2020, 43.4% of blacks owned their own home. Compare that to homeownership rates for white, Asian, and Hispanic households of 72.1%, 61.7%, and 51.1%, respectively. These variants in investments and home ownership significantly contribute to the ongoing racial wealth disparity.

So, what can be done to narrow the gap? The National Bankers Association Foundation believes that financial literacy can play a significant role and has invested resources to support it. Through their partnership with Our Money Matters (OMM), a financial wellness platform, they offer free access to their member' customers and communities. Member banks such as Liberty Bank, Carver State Bank, and Optus Bank are all showing successful outcomes with active client participation and course completion.

"At Liberty Bank, we're more than just a bank – we're a partner in your financial journey. Our commitment goes beyond banking services. We provide essential financial education through initiatives like Our Money Matters (OMM), empowering you with the knowledge to make informed decisions. Our VISA credit cards offer low, competitive rates for individuals and businesses, ensuring smart spending. We also understand life's unexpected turns and offer solutions like our Freedom Fast loan to replace payday lenders, providing quick access to funds without predatory terms. Your financial well-being matters, and we're here to support it every step of the way." -- Todd McDonald, President of Liberty Bank

Their customers are most interested in the tools that help them with budgeting, managing bills, increasing savings, and investment planning. OMM includes courses on improving their credit score, guidance on home ownership, debt management, and more. While education is already paying dividends for these users, there is numerous research to support how increased participation can be vital in reducing the wealth gap.

1. Increased Savings Rates:

Individuals who receive financial education are more likely to save money regularly. According to a study by the Global Financial Literacy Excellence Center, those who have received financial education are seven percentage points more likely to save for emergencies and retirement.

2. Better Debt Management:

Gaining a better understanding of the detrimental effects of debt can enable individuals to manage it more effectively. According to a survey by the National Endowment for Financial Education, 70% of respondents who received financial education reported feeling more confident in their ability to manage debt.

3. Improved Credit Scores:

A study by the Federal Reserve found that financial education programs positively impacted participants' credit scores, particularly for those with low initial scores. Improving credit scores leads to better access to loans and lower interest rates.

4. Homeownership Preparation:

Financial education can help potential homebuyers, particularly minorities, better understand the home buying process, mortgage options, and down payment assistance programs. According to a study by NeighborWorks America, individuals who received pre-purchase counseling and education were 33% less likely to become delinquent on their mortgages.

5. Entrepreneurship Support:

Financial education can equip aspiring entrepreneurs with the financial acumen to start and run successful businesses. According to a Small Business Administration report, minority-owned companies that received financial education were more likely to secure funding and achieve higher revenue growth.

6. Retirement Planning:

Financial education promotes the benefits of starting to save early. A survey revealed that individuals who participated in financial education programs were more likely to contribute to retirement accounts and make informed investment choices.

7. Building Generational Wealth:

Parents with more substantial financial acumen are better prepared to teach their children about money management, setting the stage for achieving solid financial habits earlier in life and leading to better longer-term outcomes.


Financial education is a potent tool for addressing the racial wealth gap. When individuals make informed decisions, they are more likely to build savings, manage debt, invest wisely, and plan earlier for their future. By targeting financial education efforts toward underserved communities, the National Bankers Association Foundation is broadening economic empowerment and building a better future for their constituents.

Click here to learn more about how the National Bankers Association Foundation helps increase financial literacy.

To read more National Bankers Association Foundation blogs, click here.


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