Study Finds Financial Literacy Gap Among African Americans

Education is key in mapping out a pathway to higher levels of financial literacy.

By Ayo Mseka

Late last year, the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business (GWSB) released a report documenting particularly low levels of financial literacy among African American adults.

The New Insights from the Personal Finance (P-Fin) Index Financial Literacy and Wellness among African Americans reports that African Americans answered 38% of the P-Fin Index questions correctly, compared with 55% for whites, indicating a significant financial literacy gap.

African American financial literacy was highest in the functional area of borrowing, with 47% of these questions answered correctly, on average, and lowest in the area of insuring, with 32% of questions answered correctly.

African American financial literacy is lower than that of whites in all but one functional knowledge area.

African American and white respondents scored similarly in the area of comprehending risk.

There is a strong link between financial literacy and financial wellness among African Americans. Those who are more financially literate are more likely to plan and save for retirement, to have non-retirement savings and to better manage their debt; they are also less likely to be financially fragile.

“African Americans make up 13% of the U.S. population and constitute a critical segment of our economy. Yet financial literacy gaps exist across this demographic group regardless of gender, age, income level or degree of education,” said Stephanie Bell-Rose, head of the TIAA Institute. “It is imperative that we continue to shed light on this challenge in order to better map a course for financial success.”

“Our research finds that African Americans tend to exhibit lower financial well-being than the U.S. white population. Given the strong link between financial literacy and financial well-being, increased financial knowledge can lead to improved financial capability and behaviors,” said Annamaria Lusardi, academic director of GFLEC and Denit Trust endowed chair of economics and accountancy at GWSB. “Increasing efforts to promote research-based financial education in school and the workplace is one key solution for promoting financial well-being among African Americans.”

Research-based financial education in schools and the workplace is one key solution for promoting the financial well-being of African Americans.

“This important research and data set underscore the centrality of financial decision making in modern America,” said Cy Richardson, Senior Vice President for Programs, National Urban League. “The convergence of financial, credit and debt management provides headwinds for us all — yet structurally speaking the African American community has little margin for error compared to other groups and must continue to demonstrate progress on the critical measures and knowledge that is necessary to make financially responsible decisions — decisions that are integral to our everyday lives and existence.”

Increasing Financial Literacy

As an advisor, there are several steps you can take to enhance your clients’ or prospects’ financial literacy levels — no matter their demographic background. First, you can visit NAIFA’s financial security website, www. financialsecurity.org, which offers some helpful hints on increasing financial literacy among all Americans.

The Life Happens site at www.lifehappens.org is also a treasure trove of information on basic financial concepts, products and services your prospects and clients can use to enhance their financial-literacy skills.

The TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) provides a comprehensive barometer of U.S. adults’ readiness to make sound financial decisions. It is unique in its capacity to examine financial literacy across eight common financial activities: earning, consuming, saving, investing, borrowing, insuring, understanding risk and gathering information.

The report, with new insights on financial literacy levels of the African-American population, was authored by Paul Yakoboski, Senior Economist at the TIAA Institute; Annamaria Lusardi, Academic Director at GFLEC, GWSB; and Andrea Hasler, Assistant Research Professor in Financial Literacy at GFLEC, GWSB.

NAIFA Member Profile: Win Havir, CPCU, LACP, CLF, LUTCF, FSS, AIC

This NAIFA Trustee is using her time and talent to give back to NAIFA and her community.

By Ayo Mseka

Spend some time with NAIFA Trustee Win Havir and you will quickly discover her dedication to her career, to NAIFA and to her community.

Havir joined the insurance and financial services industry in 1986. She had a unique career path with State Farm Insurance, serving in both fire and casualty and auto claims. She moved on to agency field leadership and retired after 30 years of service.

Today, she is Executive Vice President of Business Development for Educators Insurance Resources Services Inc. in Saint Paul, Minnesota, where she represents The Horace Mann Companies. Her charge, she proudly notes, is to ensure an excellent experience for all of her clients — from needs assessment to the delivery of high-quality products and outstanding follow-up service.

“I enjoy developing relationship-based creative outreach strategies to attract and retain clients in the educational community,” she said. “I also assist in seeking out and sourcing new clients by developing networks and identifying relevant resources for sales and business development in the educational field.”

The Many Benefits Of Naifa

Havir displays this same level of enthusiasm for NAIFA, which she learned about from a friend while working at State Farm. “She felt strongly that there were many benefits to belonging,” she said. “It was a place where I could learn from the best in the industry and be better positioned to serve my clients.” That friend offered to take her to a meeting, and Havir joined NAIFA shortly afterward.

“Membership comes with an obligation to serve others whether you are a formal or an informal leader in the organization,” she said, as she describes the many benefits of NAIFA. “One of the benefits of being a NAIFA member is the ability to serve in a capacity that utilizes your strengths and abilities.” the benefits of being a NAIFA member is the ability to serve in a capacity that utilizes your strengths and abilities.”

Havir is using her strengths and abilities to serve NAIFA in many capacities. Apart from being a NAIFA trustee, she is also a member of the association’s Diversity Task Force, which helps bring awareness, growth and development to the cultural competencies that foster innovation and improve success both personally and professionally.

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Her initial role, she said, was to help grow membership and create practical resources and tools for leaders of diverse and inclusive workforces and to gain a better understanding of how to serve multicultural communities.

“My involvement in the task force gives me the opportunity to pay it forward by encouraging others to think and see life from different perspectives,” she said. “This lifts all of us up and makes us all better people. Diversity of thought allows us to see things in a different light, supporting greater understanding for mutually beneficial outcomes. One of my greatest passions is mentoring girls and women of color. By fostering an environment of support, they can dream big and live their passion.”

When asked why she does so much to help lift others up, her answer is quick and to the point: “I have a unique and diverse cultural background,” she said. “My father came to the United States as an immigrant from China after being released from a prisoner of war camp. My mother is from Hawaii. I remember as a young child experiencing times when my family struggled financially and emotionally to become acculturated and to assimilate into the American culture. My father always supported education and learning. He told us that education was the one thing that no one could ever take away from us.”

Havir must have inherited her father’s love for education — today, she has earned an MA degree, as well as several industry designations, including the LUTCF, LACP, FSS, the CPCU, CLF and the AIC.

Always striving to learn more, she is also a proud graduate of LILI, NAIFA’s highly-sought-after, leadershipdevelopment program. “A key tenet from LILI revolves around Stephen Covey’s The 7 Habits of Highly Effective People statement: Seek first to understand, then to be understood,” she said. “Listen with the heart of a servant leader. Sometimes in the crazy busy day-to-day world, we need to reflect, and self-awareness can be one of the most challenging concepts.”

Giving Back

When she is not helping her clients achieve their financial goals or volunteering for NAIFA, Havir is active in various civic and community organizations. She is a member of the National Advisory Board for Asian Upward by Elevate.

“My entire life, my family has taught me to give back to others in service to our community,” she said. “My family also set the example by giving back to those who helped us acculturate and assimilate into the American culture. From the time I was a young child, I belonged to multiple service and civic organizations in my community, including Optimist International, Soroptimist International, Eastern Star and Alpha Omicron Pi.” Havir is also a charter member of the Twin Cities Chapter of Women in Insurance and Financial Services (WIFS).

Havir’s long and storied career has given her many attributes worth emulating. When asked what advice she would like to share with other NAIFA members, she had this to say: “Passion sparks the fuel and feeds the fire inside all of us. If you don’t love, I mean truly love what you do, it is just a job that pays you money. Life is about constantly changing, evolving and moving forward. Find the internal spark that is already within you, the one that brings you joy and fulfillment.“