21% of Black Americans say the pandemic has revealed the need to be better prepared financially
Nearly a third of black households said they lost their savings during the pandemic
The pandemic has put financial strain on many Americans, but not all groups have been affected equally. Studies show that the wealth gap has widened, leaving the ultra-rich in a better position and putting black and Latino households, in particular, in worse shape than before the public health crisis.
A new survey from online life insurance company Bestow sought to understand how the COVID-19 crisis has impacted the financial mindset of black Americans. According to respondents, the main financial lesson (21% of respondents) learned from the last two years is to prepare for the unexpected because 31% of black households said they lost their savings during the crisis.
The disproportionate financial impact
In a recent Affirm survey, the average adult said worrying about money at least six times a day. Inflation in the prices of utilities, food and housing has affected the bottom line of many consumers and heightened daily worries about financial stability.
But for black Americans, the pandemic has only exacerbated a pre-existing problem. In 2019, the Federal Reserve reported that the typical white family in the United States had eight times the wealth of the typical black family, putting white Americans in a much stronger position to weather the impending crisis.
In April 2020, 44% of black Americans told the Pew Research Center that they or someone in their household had lost their job or wages, compared to just 38% of white adults, and 73% of blacks. Americans said they didn’t have three months of emergency savings, compared to 47% of white respondents. In December 2021, Black households reported paying more for financing over the past year than other households.
According to the CDC, black Americans have also experienced 2.5 times the COVID-19 hospitalization rates of white Americans and 1.7 times the death rate.
The Changing Views of Black Americans
While 21% of Bestow survey respondents said they needed to be better prepared financially for an unexpected job or income loss, here’s how they shared how they hope to plan to be better prepared for future financial emergencies:
15% want to save more money per paycheck
14% want to reduce the amount of their debts
13% expressed the need to purchase life insurance to protect against the unexpected loss of a loved one
12% said they needed to save more money for unexpected healthcare expenses
10% want to reduce fixed monthly expenses, such as car payments and phone bills
For many participants in the Bestow survey, their financial safety net may also have been exhausted during the pandemic due to the death of a loved one. When asked how they would cover a future emergency expense such as the loss of a family member, this is what respondents said:
30% would go into debt with a funeral home payment plan or credit card debt
30% would rely on community funding through friends, church, or a service like GoFundMe
In the event of a funeral, an unprepared consumer could be faced with difficult financial choices that will only make matters worse. Funeral loans can come with very high fees, including origination fees of up to 8% and interest rates of up to 35% or more.
When faced with such a crisis without life insurance, financial advisers can encourage alternatives, including comparison shopping for a funeral discount or applying for an alternative payday loan (ALP) with a local credit union.
Methodology: An online survey of 565 self-identified black Americans based in the United States was conducted between January 27 and January 31, 2022, with a median age of 35 and a personal annual income of $45,000. Of these respondents, 66% had financial dependents.