By Karla Henriquez
Young adults are the most racially and ethnically diverse group in the country, yet they are often seen as a monolithic group. Summer 2020 unveiled inequities deeply ingrained in our society. For Black and Latinx communities, these are inequities that many have been fighting against for years. Our new report, “Race, Ethnicity, and the Financial Lives of Young Adults,” sheds light on the different financial challenges faced by young adults, especially Black and Latinx young adults.
In partnership with the GenForward Survey, housed at the University of Chicago, the Financial Health Network designed and fielded a survey to further understand the financial lives of young adults. We found that on average, young people are struggling more financially than the general population. Among young adults ages 18-36, only 22% are Financially Healthy compared with 33% of the general population. We also find that Black and Latinx young adults are bearing the largest burden among all young adults. In fact:
On average, Black and Latinx young adults have less liquid savings than their White and Asian American peers, which leaves them with a smaller financial cushion to turn to in an emergency or an unexpected event.
- More than half of Black (55%) and Latinx (57%) young adults say they do not have enough savings to cover at least three months of living expenses, compared with 48% of White and 32% of Asian American young adults.
Black and Latinx young adults are more likely than White and Asian American young adults to say they have unmanageable and high-cost debt, which hinders their ability to access low-cost debt in the future and build wealth through other means.
- 31% of Black and 28% of Latinx young adults report having more debt than is manageable, compared with 22% of White and 17% of Asian American young adults.
The enduring racial wealth gap has denied Black and Latinx young adults the ability to build wealth through generational transfers of wealth from their family.
- Just 30% of Black young adults and 37% of Latinx young adults say their families could help them cover an unexpected bill of $1,000, compared with 45% of White and 53% of Asian American young adults.
There is a confidence gap among Latinx young adults and their Black, White, and Asian American peers about their long-term financial goals and insurance coverage.
- 65% of Latinx young adults say they are not confident they are on track to meet their long-term financial goals, followed by 54% of Black, 52% of White, and 54% of Asian American young adults.
Financial education is not enough to close the gaps in financial health outcomes for young people. Financial institutions, employers, and policymakers have a responsibility to address systemic racism and discrimination. Race-based segregation, workplace discrimination, and anti-immigrant sentiments all contribute to the lived experiences and financial health of Black and Latinx young people. The disproportionate impact of COVID-19 on communities of color and young adults can be tied to many of these systemic failures.
On a recent episode of Code Switch, Ed Yong, a science reporter for The Atlantic, called for radical introspection in order to change inequities in health. He suggested that what we thought was “normal” before the pandemic was in fact unequal to many. In the financial field, we need to be clear about the financial lives of young people to solve the systemic barriers to financial health for Black and Latinx young adults.
We cannot move forward without learning from our past. Policies to close the racial wealth gap and address income inequality need to explicitly acknowledge the experiences of Black and Latinx young adults. The mutual aid efforts that have emerged in the wake of the pandemic, many led by young adults, serve as an example of what can be achieved. Young adults are a profound reminder of the power of optimism and collective action.
To explore disparities in financial health outcomes among young adults, read the full report here.