NEWARK, N.J. - African Americans say they are optimistic about achieving their financial goals, many of which reflect a strong focus on the well-being of the family and community, according to The African American Financial Experience, a study released today by Prudential Financial, Inc.. However, the study also found that African Americans tend to hold fewer financial products, invest more conservatively, lack relationships with financial professionals and be more likely to borrow from company retirement plans - all of which are barriers to achieving their financial goals.
The study underscores growing affluence in the African American community and the importance of financial planning to achieve financial security. But while African Americans are looking for assistance and advice, 78 percent feel financial services companies have not effectively engaged the African American community and, as a result, most do not use or have access to financial advisors.
“Understanding the financial needs of the African American community is essential if the financial industry is to build trust and productive relationships,” said Charles Lowrey, chief operating officer, Prudential's U.S. Businesses. “We believe this study gives us great insight into ways the financial services industry can address challenges faced by the African American community.”
In the African American community, financial goals are not just about increasing personal affluence or planning for a secure retirement. The survey found that African Americans are more likely than the general population to cite charitable donations as an important goal (68 percent vs. 55 percent), or to rate issues like educating children about debt avoidance and providing college tuition as very important to them.
When it comes to retirement readiness, The African American Financial Experience found that only two in 10 African Americans believe that they are on track to meet their planning and savings goals for retirement, and nearly twice as many say they are way behind or haven't even started. In fact, the study found that 60 percent of African Americans surveyed have less than $50,000 in company retirement plans and only 23 percent have more than $100,000.
While most Americans expect company-sponsored retirement plans to be the primary source of retirement income, African Americans are slightly less likely than the general population to put money into these plans on a regular basis. And they are three times more likely to tap into their 401(k) or similar plans to meet immediate financial needs.
“African Americans are looking to their employers for information, advice and tools to help bolster their savings and better plan for their financial goals,” said Sharon C. Taylor, senior vice president of human resources at Prudential. “Clearly, companies need to do more if they are going to help African Americans achieve financial security, both as individuals and in the workplace.”
The African American Financial Experience also found:
While 82 percent of African Americans believe maintaining their current lifestyle in retirement is critical, only one-third feel confident they will be able to accomplish this. In addition, 83 percent place critical importance on not becoming a financial burden on loved ones, but just one in 10 is confident of being able to achieve that goal.
African Americans say their most important future financial needs include building wealth portfolios and retirement nest eggs as well as transferring wealth to their heirs.
African American decision-makers tend to be more independent learners when it comes to finances, relying on books, financial websites, financial seminars and conferences and their employers for information. They also show a high interest in learning about financial issues through faith-based organizations.
African American women are driving financial decisions in their households. Of the African American women surveyed, 72 percent indicated that they are the primary financial decision-makers in their households and do not share financial decision-making equally. This compares with 69% of African American men, and 54 percent of the general population.
African Americans are nearly twice as likely to have a dream of starting a small business as those in the general population (35 percent vs. 19 percent), and view starting their own small business as a path to financial freedom. However, more than half of those with an interest in starting a small business say a lack of capital has been the primary hurdle to getting started.
The African American Financial Experience survey was conducted in November 2010 as part of a series of research projects focused on multicultural markets. It polled 1,500 African American financial decision-makers between the ages of 25-70 with incomes above $25,000 and 500 general population financial decision-makers as a benchmark.
Prudential Financial, Inc. (NYSE: PRU), a financial services leader, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. In the U.S., Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century.