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Blacks and Financial Services - US - March 2010

Nearly half of all African Americans are either unbanked or underbanked, having little or no relationship with a bank or financial institution. It is important to recognize the depth of distrust of the banking industry within the Black community for a variety of reasons. Recent class-action lawsuits, brought against major banks charging improper handling of mortgages and steering Black homeowners into high-risk mortgages, are well known within the Black community. This has not helped build the institutional trust that is needed to overcome this hurdle.

Because wealth building cannot begin without engagement with financial institutions it is vital to increase the drive for financial literacy among all Americans and particularly among low- and moderate-income Black adults and youth in order to secure their future prosperity.

This report addresses the following questions:

  • What is the current financial state of Black America?
  • What factors contribute to the high levels of unbanked and underbanked individuals? And how can financial marketers begin to reverse this trend?
  • What are the biggest barriers to retirement planning for Black workers?
  • What advertising messages will be the most effective?
  • What factors have the most impact on financial decisions? Education? Age? Household income?

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Sources
          • Consumer survey data
            • Consumer Expenditure Survey
              • Advertising
                • Abbreviations and terms
                  • Abbreviations
                    • Terms
                      • Generations
                      • Executive Summary

                          • Contributing factors to Black buying power
                            • Black household income and buying power
                              • Changes in income and spending
                                • Saving in the Black household
                                  • Attitudes toward money, primary financial concerns, and risk
                                    • Banking and investment services owned
                                      • Loans held
                                        • Card ownership and usage
                                          • Attitudes towards financial decision making, sources of advice
                                            • Insurance products
                                              • Health insurance
                                                • Other insurance
                                                  • Retirement planning
                                                  • Insights and Opportunities

                                                    • Community banks and credit unions should maximize current opportunity
                                                      • Automatic sign-up for employer 401(k)s
                                                        • Increased savings offer new opportunities
                                                          • Spending vs. saving—offer flexibility
                                                            • The Walmart factor—more to come?
                                                            • Inspire Insights

                                                                • Trend: My Financial Service
                                                                  • What’s it about?
                                                                    • What we've seen
                                                                      • Specifics
                                                                        • Implications
                                                                          • Trend: Life After Debt
                                                                            • What’s it about?
                                                                              • What we've seen
                                                                                • Specifics
                                                                                  • Implications
                                                                                  • Contributing Factors to Black Buying Power

                                                                                    • Key points
                                                                                      • African Americans contributing less to “graying of America”
                                                                                          • Figure 1: U.S., Black population, by age, 2004-14
                                                                                        • Slight decline in household size
                                                                                          • Figure 2: Average household size, by Hispanic origin/race of householder, 2001 and 2008
                                                                                          • Figure 3: Households, by number of persons in the household—Hispanics vs. non-Hispanics, 2009
                                                                                          • Figure 4: Households, by number of persons in the household—Black vs. all, 2009
                                                                                          • Figure 5: Black households and all households, by presence and ages of children, 2009
                                                                                        • Number of household earners
                                                                                          • Figure 6: Number of Black household earners, by household income, December 2009
                                                                                          • Figure 7: Number of Black household earners, by age, December 2009
                                                                                      • Black Household Income and Buying Power

                                                                                        • Key points
                                                                                          • Income distribution
                                                                                            • Figure 8: Household income distribution for all households and Black households, 2008
                                                                                            • Figure 9: Household income distribution, by race/Hispanic origin of householder, 2008
                                                                                          • Median income
                                                                                            • Figure 10: Median household income, by race/Hispanic origin of householder, 2008
                                                                                          • Income of Black households versus total U.S. households
                                                                                            • Figure 11: Increase in percentage of Black households with incomes of $50K or more versus total U.S. households, 2003 and 2007
                                                                                          • Black vs. White income
                                                                                            • Figure 12: Black household income as a percentage of White household income, 1998-2008
                                                                                          • Purchasing power
                                                                                            • Figure 13: Purchasing power, by race/Hispanic origin, 2008
                                                                                            • Figure 14: Top ten states with the largest share of Black buying power, 2008
                                                                                        • Changes in Income and Spending

                                                                                          • Key points
                                                                                            • Impact of the recession—overview
                                                                                              • Figure 15: Adults vs. older Black adults and the recession, 2010
                                                                                            • Low-income Black adults facing declines in household income
                                                                                              • Figure 16: Changes in Black household income, by household income, December 2009
                                                                                            • College educated Black households less likely to see income decline
                                                                                              • Figure 17: Changes in Black household income, by educational attainment, December 2009
                                                                                            • Excessive spending among Black women may be slowing
                                                                                              • Figure 18: Blacks’ attitudes toward spending, by gender, December 2009
                                                                                            • Impact of the economy on Black households
                                                                                              • Focus is frugality, regardless of household income
                                                                                                • Figure 19: Impact of the current economy on Black households, by household income, December 2009
                                                                                              • Financial behavior is impacted by the presence of children in the home
                                                                                                • Figure 20: Impact of the current economy on Black households, by presence and number of children in the household, December 2009
                                                                                              • Financial outlook
                                                                                                • Regardless of income, Black households are spending less
                                                                                                  • Figure 21: Blacks’ attitudes toward financial situation, by household income, December 2009
                                                                                                • Less optimism among post-graduate level African Americans
                                                                                                  • Figure 22: Blacks’ attitudes toward financial situation, by educational attainment, December 2009
                                                                                                • African Americans have a positive economic outlook
                                                                                                    • Figure 23: Blacks’ attitudes towards whether they are better or worse off than five years ago, 2007 and 2009
                                                                                                • Saving in The Black Household

                                                                                                  • Key points
                                                                                                    • Monthly saving habits
                                                                                                      • Amount saved is reflective of income level
                                                                                                        • Figure 24: Monthly savings of Black households, by household income, December 2009
                                                                                                      • Households with children save more than those without children
                                                                                                        • Figure 25: Monthly savings of Black households, by presence and number of children in the household, December 2009
                                                                                                      • Ownership of savings vehicles
                                                                                                        • Figure 26: Ownership of savings vehicles, by race/Hispanic origin, April 2008-June 2009
                                                                                                      • Changes in saving habits
                                                                                                        • Figure 27: Changes in saving habits in the Black household, by household income, December 2009
                                                                                                      • Save or splurge?
                                                                                                        • Figure 28: Save or splurge, by household income, December 2009
                                                                                                        • Figure 29: Attitudes towards money, by gender, April 2008-June 2009
                                                                                                      • Saving for what?
                                                                                                        • Figure 30: Saving habits of Black households, by educational attainment, December 2009
                                                                                                    • Attitudes Toward Money, Primary Financial Concerns and Risk

                                                                                                      • Key points
                                                                                                        • Attitudes toward money
                                                                                                          • Black adults are less averse to being in debt
                                                                                                              • Figure 31: Attitudes toward money, by race/Hispanic origin, April 2008-June 2009
                                                                                                            • Higher income Black households are among the underbanked
                                                                                                              • Figure 32: Attitudes toward money, by household income, April 2008-June 2009
                                                                                                            • Younger Black adults more trusting of banks
                                                                                                              • Figure 33: Attitudes toward money, by age, April 2008-June 2009
                                                                                                            • Primary financial concerns
                                                                                                              • Concerns about retirement savings increase with household income
                                                                                                                • Figure 34: Blacks’ primary financial concerns, by household income, December 2009
                                                                                                              • Parents are more likely to use credit cards
                                                                                                                • Figure 35: Blacks’ primary financial concerns, by presence and number of children in the household, December 2009
                                                                                                              • Black men and women are economizing
                                                                                                                • Putting family before self
                                                                                                                  • Giving and receiving financial support
                                                                                                                    • Figure 36: Financial behavior and attitudes of Black adults, by gender, December 2009
                                                                                                                  • Younger Black adults uninterested in acquiring debt
                                                                                                                      • Figure 37: Financial behavior and attitudes of Black adults, by age, December 2009
                                                                                                                    • Attitudes toward risk
                                                                                                                      • Black investors less risk-averse
                                                                                                                        • Figure 38: Attitudes toward finances, advice and risk, by race/Hispanic origin, April 2008-June 2009
                                                                                                                      • Age determines risk acceptance
                                                                                                                          • Figure 39: Blacks’ attitudes toward finances, advice and risk, by age, April 2008-June 2009
                                                                                                                      • Banking and Investment Services Owned

                                                                                                                        • Key points
                                                                                                                          • Investment products owned
                                                                                                                            • Investment products owned, Blacks vs. others
                                                                                                                              • Figure 40: Investment ownership, by race/Hispanic origin, April 2008-June 2009
                                                                                                                            • Investment products owned by Black adults
                                                                                                                              • Figure 41: Investment ownership by Black adults, by household income, April 2008-June 2009
                                                                                                                            • Credit monitoring, annuities and CDs—ownership and intent to have
                                                                                                                              • Figure 42: Financial products owned by Black households, by household income, December 2009
                                                                                                                              • Figure 43: Financial products owned by Black households, by educational attainment, December 2009
                                                                                                                            • Banking products
                                                                                                                              • Blacks’ relationship with banking services
                                                                                                                                • Banking products owned, Blacks vs. others
                                                                                                                                  • Figure 44: Banking/investment services owned, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                • Black banking/investment services owned
                                                                                                                                  • Figure 45: Banking/investment services owned by Black households, by educational attainment, April 2008-June 2009
                                                                                                                                  • Figure 46: Banking/investment services owned by Black households, by household income, April 2008-June 2009
                                                                                                                              • Loans Held

                                                                                                                                • Key points
                                                                                                                                  • Half of all Black adults do not have loans
                                                                                                                                    • Figure 47: Loan ownership, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                  • Black adults more likely to have auto loans vs. mortgage
                                                                                                                                    • Figure 48: Loan ownership among Black adults, by household income, April 2008-June 2009
                                                                                                                                  • Education loans most likely among Black adults aged 18-24
                                                                                                                                    • Figure 49: Loan ownership among Black adults, by age, April 2008-June 2009
                                                                                                                                • Card Ownership and Usage

                                                                                                                                  • Key points
                                                                                                                                    • Debit cards
                                                                                                                                      • Lower levels of ownership of debit cards by African Americans
                                                                                                                                        • Figure 50: ATM/debit card ownership, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                      • Black women have higher ownership of ATM/debit cards
                                                                                                                                        • Figure 51: ATM/debit card ownership, by gender, April 2008-June 2009
                                                                                                                                      • Black adults are frequent users of ATM/debit cards
                                                                                                                                        • Figure 52: ATM/debit card usage frequency, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                      • The higher the income, the higher the usage of ATM cards
                                                                                                                                        • Figure 53: ATM/debit card usage frequency, by household income, April 2008-June 2009
                                                                                                                                      • Credit cards
                                                                                                                                        • Outstanding credit
                                                                                                                                          • Figure 54: Consumer credit outstanding, percentage change, 2005-09
                                                                                                                                        • Credit card ownership
                                                                                                                                          • Figure 55: Credit card ownership, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                        • Credit card ownership higher among Black women
                                                                                                                                          • Figure 56: Ownership of credit cards by Black adults, by gender and age, April 2008-June 2009
                                                                                                                                        • Attitudes about credit card debt by Black consumers
                                                                                                                                          • Figure 57: Attitudes towards credit card debt by Black adults, by household income, December 2009
                                                                                                                                        • Educational attainment is not a guarantee of financial security
                                                                                                                                          • Figure 58: Attitudes towards credit card debt by Black adults, by educational attainment, December 2009
                                                                                                                                      • Attitudes Towards Financial Decision-making, Sources of Advice

                                                                                                                                        • Key points
                                                                                                                                          • Black households less engaged in financial services and planning
                                                                                                                                            • Overview
                                                                                                                                              • The unbanked
                                                                                                                                                • Unbanked by choice
                                                                                                                                                  • High-risk customers
                                                                                                                                                    • Attitudes toward use of financial services
                                                                                                                                                      • By household income
                                                                                                                                                        • Figure 59: Attitudes toward use of financial services by Black adults, by household income, December 2009
                                                                                                                                                      • By educational attainment
                                                                                                                                                        • Figure 60: Attitudes toward use of financial services by Black adults, by educational attainment, December 2009
                                                                                                                                                      • Sources of financial advice
                                                                                                                                                        • Financial literacy is the key to success for Black investors
                                                                                                                                                            • Figure 61: Blacks’ sources of financial advice, by household income, December 2009
                                                                                                                                                          • Educational attainment is a factor in seeking financial advice
                                                                                                                                                            • Figure 62: Blacks’ sources of financial advice, by educational attainment, December 2009
                                                                                                                                                        • Insurance Products Overview

                                                                                                                                                          • Ownership of insurance products other than those provided by an employer
                                                                                                                                                            • Figure 63: Insurance products (other than that offered by an employer) owned by Black households, by household income, December 2009
                                                                                                                                                            • Figure 64: Insurance products (other than that offered by an employer) owned by Black households, by age, December 2009
                                                                                                                                                          • Ownership of health insurance—total
                                                                                                                                                            • Figure 65: Ownership of health insurance (empoyer provided and private), by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                            • Figure 66: Black household ownership of health insurance (empoyer provided and private), by household income, April 2008-June 2009
                                                                                                                                                          • Importance of being well insured—home and life insurance
                                                                                                                                                            • Figure 67: Importance of being well insured—home and life insurance, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                        • Health Insurance

                                                                                                                                                          • Key points
                                                                                                                                                            • Expenditure on health insurance
                                                                                                                                                              • Figure 68: Average annual expenditures on health insurance, by Black and other races, 2008
                                                                                                                                                            • Black households spend more of their healthcare dollars on health insurance
                                                                                                                                                              • Figure 69: Distribution of average annual healthcare expenditures, by Black and other races, 2008
                                                                                                                                                            • Changes in Black healthcare expenditures
                                                                                                                                                              • Figure 70: Average annual Black household expenditures on healthcare, 2002-10
                                                                                                                                                              • Figure 71: Changes in spending by Black households for medical expenses, by household income, November 2009
                                                                                                                                                            • Sources of health insurance
                                                                                                                                                              • Figure 72: Means of obtaining health insurance, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                              • Figure 73: Black households’ means of obtaining health insurance, by household income, April 2008-June 2009
                                                                                                                                                          • Other Insurance

                                                                                                                                                            • Key points
                                                                                                                                                              • Life insurance
                                                                                                                                                                • Black adults are less likely to own life insurance
                                                                                                                                                                  • Figure 74: Ownership of life insurance, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                                • Life insurance companies are targeting older Black consumers
                                                                                                                                                                  • Figure 75: Ownership of life insurance by Black households, by age, April 2008-June 2009
                                                                                                                                                                • Auto insurance
                                                                                                                                                                  • Figure 76: Ownership of auto insurance, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                                  • Figure 77: Ownership of auto insurance by Black households, by household income, April 2008-June 2009
                                                                                                                                                                • Homeowner’s insurance
                                                                                                                                                                  • Figure 78: Ownership of home insurance, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                                  • Figure 79: Ownership of home insurance by Black households, by household income, April 2008-June 2009
                                                                                                                                                                • Disability and long-term care insurance
                                                                                                                                                                • Retirement Planning

                                                                                                                                                                  • Key points
                                                                                                                                                                    • A different kind of retirement
                                                                                                                                                                      • Figure 80: Attitudes toward individual’s responsibility for retirement planning, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                                    • As incomes increase, so does the belief in personal responsibility
                                                                                                                                                                      • Figure 81: Attitudes toward individual’s responsibility for retirement planning by Black adults, by household income, April 2008-June 2009
                                                                                                                                                                    • Younger Black adults assume more personal responsibility for retirement
                                                                                                                                                                      • Figure 82: Attitudes toward individual’s responsibility for retirement planning by Black adults, by age, April 2008-June 2009
                                                                                                                                                                    • Retirement savings
                                                                                                                                                                        • Figure 83: Ownership of 401(k) accounts, by race/Hispanic origin, April 2008-June 2009
                                                                                                                                                                      • Ownership of pensions increases with household income
                                                                                                                                                                        • Figure 84: Ownership of 401(k) accounts by Black adults, by household income, April 2008-June 2009
                                                                                                                                                                    • Cluster Analysis

                                                                                                                                                                        • Middle-income, debt-averse (MIDA).
                                                                                                                                                                          • Demographics
                                                                                                                                                                            • Characteristics
                                                                                                                                                                              • Opportunity
                                                                                                                                                                                • Overwhelmed and just getting by (OJGB)
                                                                                                                                                                                  • Demographics
                                                                                                                                                                                    • Characteristics
                                                                                                                                                                                      • Opportunity
                                                                                                                                                                                        • Optimistic savers (OS)
                                                                                                                                                                                          • Demographics
                                                                                                                                                                                            • Characteristics
                                                                                                                                                                                              • Opportunity
                                                                                                                                                                                                • Cluster characteristics
                                                                                                                                                                                                  • Figure 85: Black financial clusters, December 2009
                                                                                                                                                                                                  • Figure 86: Attitudes toward financial situation, by Black financial clusters, December 2009
                                                                                                                                                                                                  • Figure 87: Financial behavior and attitudes, by Black financial clusters, December 2009
                                                                                                                                                                                                  • Figure 88: Saving habits, by Black financial clusters, December 2009
                                                                                                                                                                                                  • Figure 89: Use of financial services, by Black financial clusters, December 2009
                                                                                                                                                                                                  • Figure 90: Attitudes toward financial situation, by Black financial clusters, December 2009
                                                                                                                                                                                                  • Figure 91: Attitudes towards the impact of the current economy, by Black financial clusters, December 2009
                                                                                                                                                                                                  • Figure 92: Ownership of insurance and financial products, by Black financial clusters, December 2009
                                                                                                                                                                                                  • Figure 93: Sources of financial advice, by Black financial clusters, December 2009
                                                                                                                                                                                                  • Figure 94: Primary financial concerns, by Black financial clusters, December 2009
                                                                                                                                                                                                  • Figure 95: Perception of credit card debt, by Black financial clusters, December 2009
                                                                                                                                                                                                • Demographics:
                                                                                                                                                                                                  • Figure 96: Black financial clusters, by gender, December 2009
                                                                                                                                                                                                  • Figure 97: Black financial clusters, by age, December 2009
                                                                                                                                                                                                  • Figure 98: Black financial clusters, by household income, December 2009
                                                                                                                                                                                                  • Figure 99: Black financial clusters, by education, December 2009
                                                                                                                                                                                                  • Figure 100: Black financial clusters, by marital status, December 2009
                                                                                                                                                                                                • Cluster methodology
                                                                                                                                                                                                • Marketing and Advertisements

                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                    • Television commercials
                                                                                                                                                                                                      • Narrow range of choices in financial services advertising
                                                                                                                                                                                                        • Figure 101: Colonial Penn Life Insurance, Pennies a Day—Spare Change, January 2008
                                                                                                                                                                                                        • Figure 102: The Money Tree, New Apartment, June 2008
                                                                                                                                                                                                        • Figure 103: The Cash Store, Carol, October 2007
                                                                                                                                                                                                      • Some companies are producing relevant, informative commercials
                                                                                                                                                                                                        • Figure 104: ING Financial, Clark, February 2010
                                                                                                                                                                                                        • Figure 105: Allstate Insurance, Lessons Learned, May 2009
                                                                                                                                                                                                        • Figure 106: E-Trade, Laughing Babies, February 2009
                                                                                                                                                                                                      • Print ads
                                                                                                                                                                                                        • Figure 107: Wells Fargo, 2009
                                                                                                                                                                                                        • Figure 108: Prudential Financial, Retirement Red Zone, 2010
                                                                                                                                                                                                        • Figure 109: MetLife, Generation to Generation, 2009
                                                                                                                                                                                                        • Figure 110: State Farm, Honeymoon, 2010
                                                                                                                                                                                                    • U.S. Black Population

                                                                                                                                                                                                      • Key points
                                                                                                                                                                                                        • U.S. population by race
                                                                                                                                                                                                          • Figure 111: Population, by race/Hispanic origin, 2004-14
                                                                                                                                                                                                          • Figure 112: Population, by race, 1970-2020
                                                                                                                                                                                                          • Figure 113: Asian, Black, and Hispanic populations, 1970-2020
                                                                                                                                                                                                        • U.S. Black population
                                                                                                                                                                                                          • Black population by age
                                                                                                                                                                                                            • Figure 114: U.S. Black population, by age, 2004-14
                                                                                                                                                                                                          • U.S. Black geographic concentration
                                                                                                                                                                                                            • Figure 115: Black geographic concentration, by region, 2007
                                                                                                                                                                                                            • Figure 116: States with the highest share of Black residents, 2008
                                                                                                                                                                                                          • Black metros
                                                                                                                                                                                                            • Figure 117: Metropolitan status of Black households, 2001 and 2007
                                                                                                                                                                                                            • Figure 118: Top ten metropolitan areas with the largest number of Black residents, 2006-08
                                                                                                                                                                                                        • Appendix: Trade Associations

                                                                                                                                                                                                          Companies Covered

                                                                                                                                                                                                          • Amalgamated Bank
                                                                                                                                                                                                          • American Association of Retired Persons (AARP)
                                                                                                                                                                                                          • Bank of America Corporation
                                                                                                                                                                                                          • Federal Deposit Insurance Corporation
                                                                                                                                                                                                          • H&R Block, Inc.
                                                                                                                                                                                                          • Hewitt Associates
                                                                                                                                                                                                          • Monroe Bank
                                                                                                                                                                                                          • Nationwide Financial Services, Inc.
                                                                                                                                                                                                          • Prudential Financial, Inc
                                                                                                                                                                                                          • The American Bankers Association
                                                                                                                                                                                                          • The American Financial Services Association
                                                                                                                                                                                                          • U.S. Bureau of Labor Statistics
                                                                                                                                                                                                          • Walmart Stores (USA)
                                                                                                                                                                                                          • Wells Fargo & Company
                                                                                                                                                                                                          • Yahoo! Inc
                                                                                                                                                                                                          • YMCA of the USA

                                                                                                                                                                                                          Blacks and Financial Services - US - March 2010

                                                                                                                                                                                                          £3,199.84 (Excl.Tax)