Finance: Financial Mindset of Black Americans

A Look at the Financial Mindset of Black Americans in 2022

 

By Bestow Team 

The COVID-19 pandemic has caused many across the globe to reconsider all aspects of their lives in the last two years — where they live, how they work, and ways they financially prepare for the unexpected. 31% of Black households have reported losing all of their savings during the COVID-19 pandemic, removing any buffer for unexpected job loss or potential medical bills. These implications are especially dire among a population that the financial services industry has historically underserved — for example, nearly half of the Black population is unbanked or underbanked due to exclusionary products and services.  

For Black History Month, the team at Bestow surveyed more than 500 Black Americans to understand their financial mindset as effects from the COVID-19 pandemic continue. Highlights include: 

COVID-19 changed the financial mindset of Black Americans.

• The COVID-19 pandemic changed how 72% of Black Americans approach financial planning.
  • Specifically, respondents noted their top lesson (21%) from the COVID-19 pandemic was the need to better prepare financially for an unexpected job or income loss.
  • 13% acknowledged an increased awareness of the need for life insurance to help financially protect their loved ones from unexpected death.

Many Black Families are under-resourced when facing a crisis or death in the family. 

• When asked about potential funeral costs, approximately one-third (30%) of respondents said they would go into debt with a funeral home payment plan or credit card debt, while another third (30%) would rely on community funding support through friends, church, or a service like GoFundMe.  
  • Only 19% would be able to pay with cash on hand for a funeral, which is estimated to be $7,848. 
• One-third (33.6%) of Black Americans recognize that their family would be financially unable to maintain their quality of life if they died, underscoring a need for financial protection products like life insurance.

Black Americans value life insurance, but most are underinsured.

• Nearly two-thirds of Black Americans surveyed (63.1%) have some type of life insurance coverage.
• Of those with coverage, 82% have term life insurance. The median coverage amount was $90,000, which equals 2x their annual salary. Comparatively, experts recommend coverage that’s 5 to 10x your salary.
• 75% of respondents recognize that even $50,000 of life insurance coverage would have a positive impact on their families’ financial situation if something were to happen to them.
  • And a $50,000 term life insurance policy is incredibly affordable. A healthy 35-year-old woman can purchase a 20-year, $50,000 policy for as little as $8 per month.
• 80% of respondents believe their partner should have life insurance to help financially protect them.

The Black community embraces money conversations and looks to partners and family for financial advice. 

• 83% of respondents sometimes or regularly discuss money with their families.
• Black Americans’ top 3 most trusted sources for financial advice are partners (33%), financial advisors (24%), and family members (23%).

“The life insurance industry can solve a needed opportunity to reach historically underserved populations by leveraging technology as a great equalizer,” said Melbourne O’Banion, Co-Founder and CEO of Bestow. “Black Americans see the value in life insurance but aren’t securing enough coverage to help ensure financial resiliency for their families. Technology-enabled access is at the heart of our work at Bestow — building products and experiences that create a more equitable offering to all.”

Methodology

A 3-minute online survey was fielded between January 27 and 31, 2022. During this time, we captured 565 interviews of Black/African Americans in the United States, with a median age of 35 and a personal annual income of $45,000. Sixty-six percent of respondents had financial dependents.