Among Black households, 31 percent are led by a Black woman, according to Pew Research. As the head of household, Black women are responsible for investing in their family’s future and planning for retirement. However, some find themselves ill-equipped for this task. Experts say the first step in breaking generational financial barriers is through conversation.
Dr. Dana Palma, a financial advisor with Edward Jones, believes financial literacy is key for Black families. She says it’s never too early or late to begin talking about money and retirement. One obstacle she feels Black women face is that money is often a taboo subject amongst Black families.
“For our generation, we were never taught about finances. It’s not something that was ever discussed around the dinner table.”
Palma changed that when she became a mother and started teaching her son, now 18, about financial literacy from a young age.
“At age seven, I talked about stocks, and he actually started investing at age seven, and we kind of make that part of our discussions.”
When he began working at age 16, he opened a Roth IRA. They chose this vehicle instead of a traditional savings account because it’s tax-free money and, unlike a 401(k) that can’t start until age 21, this allowed him to save for his retirement and future big purchases, such as a property when he is a first-time home buyer.
Shemira Fermon, a regional leader at Primerica Financial Services, also recommends Roth IRAs to her clients, especially those who are self-employed. Although she advises others about their retirement, she wasn’t always financially literate or prepared. A trip to the store at age 20 changed her life and her ideas about finances after a chance meeting with a stranger in the aisle who happened to be in the insurance business. They met formally, and not only did she leave with a life insurance policy, but also a retirement strategy and a new career.
“I had a retirement plan with my job, but I’d moved from one job to another, and I really didn’t understand it, so she helped me understand it.”
She realized that part of a successful retirement strategy and a key component to creating generational wealth involved a solid life insurance policy. However, it was her experience that money was not a discussion point in her family or friend circle.
Her neighborhood reflected the silence around money and planning with no financial advisory offices unlike more affluent areas. This realization motivated her to get an insurance license and learn about investments so she could help her community.
“It just became a passion. I started talking to people I knew because we need to start having these discussions.”
She found some had life insurance policies, but they were predatory in nature or had exclusions or fine print that weren’t explained at the start of the policy.
Fermon recommends going over every policy, no matter how old, with a professional advisor or the insurance company to ensure the coverage is clear.
“I have a 20-year-old client who had a Gerber policy that her mom had on her since she was a kid. She went to pull money out of it, and they told her she could take out $1,200.” Fermon went over the policy and found that after 15 years, the policy was only worth $2,000.
Many Black women are trying to invest in themselves and their families’ futures, but need help understanding what vehicles work best for them. In her experience, Fermon explains that Black women are more prepared for retirement than Black men.
“Typically speaking, Black women are used to doing everything. They’re working, they’re paying the bills, so they know what money is left and what’s not left. “