By Carol Elizabeth Owens
Children who received money for Christmas got more than a chance to go shopping. That check cash gave them the gift of learning financial literacy – the skill to manage their money and make good decisions about how to use it.
“Teach children to save their money and not spend every dollar, quarter, dime, nickel or penny they receive,” said Regina Seabrook, who has more than two decades of experience in banking and finance and who volunteers in efforts that help people understand how to manage their finances.
“At home, use an empty shoe box or a piggy bank to demonstrate how saving money increases personal wealth,” she said. “… African Americans should begin teaching their children about financial literacy as soon as the child can talk and begin with the moment a child receives their first gift of money.”
African-Americans scored lower than Caucasians on a test of financial literacy, according to a November report from the TIAA Institute, which provides financial resources and information. Neither group received a passing grade, but African-Americans answered 38 percent of questions correctly, while Whites scored 55 percent.
“There is a strong link between financial literacy and financial wellness among African-Americans,” according to the TIAA Institute. “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, as well as being less likely to be financially fragile.”
Seabrook is senior branch manager at Visions Federal Credit Union. Speaking from personal experience, she said, “Financial literacy is the gateway to financial wellness and financial security. We must learn to understand how to financially secure our futures by using available advantageous financial options such as saving, investment and retirement planning.”
Seabrook said that some African-Americans think financial literacy means having a good credit score.
She said financial literacy is more than being able to borrow money. She said it’s a lifestyle.
“We must understand budgeting and know how to manage our finances within a set budget … take care to establish an income, as well as saving/checking accounts, insurance, investments, retirement plans and other financial options that fit our individual circumstances, situations and financial goals.”
The opposite — financial illiteracy — poses risks such as generational poverty, she said.
“We are faced with a vicious cycle of spending all of the money we have, we will be susceptible to poverty at higher proportions, we will become susceptible to predatory lending practices, such as higher insurance rates, higher rental and housing costs, higher loan financing / higher interest rates for home mortgages and car notes, higher credit card payments and lower credit limits.”
Lack of discussion at home and school about financial literacy contribute to low levels among African-Americans, Seabrook said. Lower graduation rates, low-wage jobs, not following a budget, and giving in to wants also are factors.
Seabrook said banks could do more to raise the level of financial awareness, such as community outreach, placing branches in African-American neighborhoods, as well as in schools and offering incentives for saving.
She said African-Americans can learn financial literacy by taking courses offered by community organizations, participating in first-time homebuyer programs or consumer credit counseling and reading financial magazines or watching shows about personal finance.
“Financial literacy is a choice,” Seabrook said. “We have to make the decision to have the will and the skill to succeed.”