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Why The Investing Gap is a Critical Piece of the Conversation

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Why The Investing Gap is a Critical Piece of the Conversation

As part of our Women’s History Month series, Cinneah (the founder of Flynanced) and I co-hosted a series of incredible roundtable discussions with some of our favorite women in the personal finance space with the goal of fostering rich intersectional conversations around money.

Melissa, the co-founder and content creator of the Millennial In Debt brand, refers to her community as future millionaires. We asked Melissa to describe how investing helps create millionaires. She talked to us about the investing gap that exists between men and women and how that gap is further widened by race. She also addressed the impact and why investing is such a critical piece of this conversation. Here’s what she had to share. (You can watch the full recording of the roundtable discussion, Closing the Gaps, here.)

 

Let’s start with the facts.

I am a teacher so I have to give the numbers first - then we can dismantle them. It’s estimated that by age 65, women will have lost about $400,000 in lifetime earnings.

Because they've lost these lifetime earnings, there’s less money going into 401(k)s, less money going into IRAs and less money going into the spaces that can prepare for your future life. 

Because of this, women are 80% more likely to be living in poverty than men.

Only 33% of Black households own stocks. When we talk about the stock market and we talk about investing, we often talk about bootstraps - the idea that “if I could do it, you could do it, too.” We don't talk about the fact that some bootstraps are broken. People can’t lift themselves up.


How the Investing Gap Impacted Me.

When I finished paying back all of my student loans, my dad (who’s awesome) said: “Okay, you need to save. Don’t waste your money. Save your money and put it in a savings account.”

He's an immigrant. He came from Haiti. I am a first-generation Haitian-American.  He didn't teach me to invest early. He didn't know what an IRA or a 401(k) was. So, I didn't really know either. I was making money, so I was just paying down my debt and saving money. 

It took me a really long time to understand that although saving money is great, saving money is not how you build generational wealth. Saving money is not how you grow your money. I speak often about opening an IRA, opening a 401(k), investing in index funds, and investing in certain things where if you don't touch that money and you just let it grow, it will grow a lot faster and be more effective than putting that money in your savings account.

I love my dad, but when I sat down and explained this to him, he just said “I'm so sorry.”


We Need to Talk About Investing.

This isn’t a conversation that we have very often with our parents. It’s not a conversation we have very often with immigrants, with first-generation people in America because it's not a part of the educational system.

I’m a teacher and I have worked in schools that are predominantly Black and Brown people. I’ve also worked in schools that are predominantly white. It's not being talked about anywhere. 

Students are told to take tests, go out into the world, get a job, go to school - and no one is talking to them about how to actually grow your money and be fiscally responsible. We’re not teaching them how to be millionaires, which would impact their lives in a bigger, deeper way. It’s made to seem like you can only be a millionaire if you're a rapper, singer, or an actor - and that's simply not the case.



Systemic Inequities Need to Be Part of the Conversation.

Black people carry the highest amount of high-interest debt in America. That’s preventing them from being able to invest or build an emergency savings fund. And if you don’t have money saved in an emergency savings fund, you're deemed as fiscally irresponsible.

We’re failing to analyze all of the things that prevent Black and Brown people from building wealth - having huge emergency funds or being able to put money into the market. We focus on the idea that “They made their bed. Now they have to lie in it.”

We also tell young people that they need to go to college, get an education. That’s inaccurate. 8% of people who go to school, who are Black and Brown, are investing in the market - 8%. So education isn’t the only problem. 

Only 2.4% of the country's equity market is held by Black and Brown millionaires. This has nothing to do with education. It has to do with all the things that are systemically keeping people out of the markets and out of places of power. 

My student loans are coming in at double digits and my car loan is coming in at double digits. I'm not able to get a good mortgage rate so I'm not able to gain property. All of these things are part of the conversation and are often left out. 

We need to talk about the things that have kept minority groups from investing. The median white household has a net worth 10 times that of the median Black household. There's a substantial gap between white and minority households as far as intergenerational wealth transfer. The majority of white college students are coming in with some sort of money so they can borrow less. They can take out less in student loans. They have trust funds where that's often not the case for Black and Brown families. Many minority households have a negative net worth due to debt. 

We need to talk about why Black women are carrying the highest amount of student loans. If it's about education and they're taking out loans to go to school, why is it that they’re not being put in places of power? Why are they being paid 60 cents to every white man's dollar? Before we got all these cool, fun investing apps, you had to go to a brokerage to invest. If all of these brokers are white men, I may not feel comfortable in 1970 or 1980 going into a broker to buy stocks. I’m more likely to do what my dad told me. 

The systemic inequities need to be a part of the conversation, and it needs to be a more inclusive conversation. 


Next Steps


About Melissa: 

Melissa is the co-founder and content creator of the Millennial In Debt brand.  She has paid over 100,000 dollars in student loan debt on a teacher salary, and is currently teaching millennials how to get out of debt, build generational wealth and earn financial freedom. You can follow her for all things Millennial + money on @Millennialindebt on Instagram and Millennialindebt.com