Achieving widespread financial literacy is especially challenging among America’s underserved and underbanked people of color. And yet, it is with them that financial literacy stands to have the greatest impact on our economy as a whole. The untapped economic potential of these individuals can only be fully realized by undoing the damage of decades of inequitable lending practices, educating and inspiring the next generation of entrepreneurs, and building and reinvesting wealth locally. It is a challenge at the crossroads of finance, education, advocacy and advertising.

The Challenges of the Financially Illiterate
Financial literacy includes a wide range of skills, from budgeting and understanding how credit works to planning for the future and being able to understand financial agreements. Unfortunately, these key life skills are rarely taught in school. Parents may try to do their best to educate their kids, but often pass on little more than their own misunderstandings and fears about money.

While these problems impact us all, they are disproportionately felt among people of color. Black and Latinx people are more likely to be unbanked or underbanked than whites (14%, 11% and 4%, respectively). In 2019, the Federal Reserve found that 22% of American adults were either unbanked —meaning they had no bank account at all — or underbanked, — meaning that even though they had a bank account, they still needed to rely on payday loans, checking cashing services, money orders or pawn shops in order to make ends meet.

These individuals have a number of reasons for not using banks — from not having enough to meet minimum deposit requirements to simply not trusting financial institutions. But the biggest reason stems from a misunderstanding of — or confusion around — banks fees, which can often be hidden in fine print or difficult to calculate.

In addition, people of color remain likely to experience discrimination in lending, housing and other financial areas that typically help people build and maintain wealth. As recently as the 2020 economic stimulus packages, Black businesspeople saw significantly less aid come their way. Because Black-owned businesses are more likely to be sole proprietorships, 95% of Black entrepreneurs missed out on the first round of Paycheck Protection Program loans, which only provided relief to employer companies. The Washington Post found that Black farmers received only 0.1% of more than $26 billion distributed. Beyond the systemically biased nature of many programs themselves, financial literacy again played a role as entrepreneurs had to navigate a complicated system of applying for grant money and understanding the conditions under which it was being given.

The Waiting Opportunity
Through all of these challenges, the non-white business community still offers an incredible opportunity for economic growth. Initiatives like The Path to 1555 have shown that if just 15% of Black businesses could afford to hire 1 more employee, the American economy would grow by over $55 billion. As of 2020, white people owned more than 70% of American businesses, while Latinx people held about 12% and Black people owned 9.5% As the demographics of our country change, the full picture of entrepreneurship needs to better reflect it.

Even for those who don’t choose to go into business, the importance of basic financial literacy is key to personal and family well-being, given that debt or money insecurity can quickly lead to problems like hunger, untreated illness, crime, divorce and suicide. Credit unions have played an historic role in lending to people in underserved communities when other financial institutions would not. CUs started through churches and other community fixtures are more rare these days, but all credit unions and even banks still have a large role to play in providing education to their customers and others. They can partner with schools in the community to develop financial literacy curricula as well as offer informational videos, workshops or in-person resources to their members. Offering training to social services professionals is another effective option. Employees and volunteers at community centers and Boys & Girls Clubs are often asked financial questions by people in the community, but may not always know how to answer these questions themselves.

In much the same way that doctors and other health care professionals have been trained in recent years to explain medical conditions and procedures in lay terms, financial professionals need to be given guidance on how to make common financial transactions easily understood and transparent in their disclosure of terms, fees and expectations.

Importantly, we cannot wait for the unbanked or the uninformed to come to us. A successful program in Bermuda involved government representatives taking financial workshops into the field — to construction sites and other jobsites — and then offered incentives for government contracts to those who completed the courses.

Marketing programs and offerings like these is a key part of the puzzle. As much as children need a stronger framework starting at an early age, adults need to know not to feel intimidated or embarrassed by what they don’t know or understand. In many cases, they need to be taught the skepticism and critical thinking that can keep them from being taken advantage of through scams.

And of course policy needs to continue to work to eliminate predatory lending, redlining and other unscrupulous and discriminatory financial practices.

In America, the ability to build wealth is the driver of our economy and even the key to better health and wellness. We continue to deny access to this wealth at our collective peril. In the same way that the ability to read and do math open up a world of possibility, so financial literacy can give us all the wisdom to make better financial decisions leading to greater opportunity and a better life.