How Race affects Generational Wealth
by: Logan Amos
Money has been a big part of society; there have always been people who have money and people who don’t. But the gap also affects the next generation. When people have money, they give their money and other assets to their children as well as a better education. This is called generational wealth. Generational wealth explains why many minorities are still living in poverty or lesser conditions compared to many white people.
According to a study conducted by the University of Michigan, about half of African-American grandparents in the study were homeowners in the 1960s, while 82 percent of White grandparents were homeowners. After two generations, the White grandchildren of non-homeowners were still more likely to own a home compared to the African-American grandchildren of homeowners. The leader of this study, Fabian Pfeffer, the three things that best help accumulate wealth are education, homeownership, and marriage. Homeownership and educational success make up about 53 percent of a child’s wealth similarity to parents. In the past, events like slavery, lower wages, and laws that prevent the accumulation of assets have made it hard for minorities to create wealth that will last generations by making it hard to achieve higher education and own homes. Today, getting a higher education is expensive but essential. Obtaining a degree can cause massive debts that affect you later on in life, this effect can be multiplied in a person of color.
When an African-American goes to college, they are more likely to have to pay off student loans on their own without the help of parents because they don’t have the money — owing around 85.8 percent more than the average white person in student loans. Then later in life, they get a lower-paying job than that of their white peers and continue to be disadvantaged by not being able to buy a house due to dept or will likely gain more dept to buy a home. Thus leaving them at 186% more dept than the average white person 15 years after graduation. The children of these students are also disadvantaged. Their parents don’t have the money to assist with education and living when they are still dealing with the effects of dept from earlier in life, creating an endless cycle of debt, taking way the next generations change to be successful.
What does this mean? Unless a family can accumulate wealth that can be passed from generation to generation, they will forever struggle to gain wealth for themselves and improve their conditions. But to solve this problem, you also have the change the way society sees people. Seeing a person and not a color can lead to equal job opportunities and equal pay, helping people recover from debt and giving everyone a chance for success.