Wealth, The Gift That Keeps on Giving

As we enter the holiday season so much pressure can develop to spend what you don't have and go greater into debt all in the name of "giving." This holiday season let us all give each other support to be financially responsible and engage in wealth building rather than wealth destruction.

Wealth, or net worth, is the value of a person's assets minus debts. Assets include things such as money in checking or savings accounts, real estate, and stock. Common types of debt include credit card debt, mortgages, and loans. Without any wealth, people are just a paycheck away from financial disaster. It's wealth that makes it possible to pay the bills when unemployment strikes or when illness limits a person's ability to work. It's wealth that allows people to pay for large or unexpected expenses such as a new hot water heater or a new engine. It is important during these tough economic times that celebrating the holidays doesn't inhibit one's ability to save and build wealth. This is particularly important for communities of color.

A recent report published by the Pew Research Center revealed that the wealth divide between whites and people of color hit a record high in 2009, with the median wealth of white households 20 times higher than black households and 18 times higher than Hispanic households. The recession was especially tough on people of color because they faced much higher levels of unemployment that depleted their savings, had a greater percentage of their wealth in homes whose prices plummeted by the burst of the housing bubble, and because people of color were more often targeted for subprime loans that not only cost them more money but left them more vulnerable to foreclosure.

Even before the recession the financial foundation of many families of color was typically insecure as compared to white Americans. Data from the Institute on Assets and Social Policy at Brandeis University revealed that the wealth gap between white and black families more than quadrupled between 1984 and 2007, growing from $20,000 to $95,000 (in constant dollars). Clearly, while the recession may have exacerbated the racial wealth divide, there was a significant problem even before the recession began.

The racial wealth divide is likely to remain even after the economy recovers because this divide is not simply a result of racial differences in employment, income, or investment strategies. The racial wealth divide originated generations ago when people of color were legally and routinely denied the same opportunities as whites. The inequities of the past continue to haunt current generations because parental and family wealth not only affects the amount of inheritance one receives, but also the ability to help current generations become more financially stable, for example, by helping them make a down payment on a home or pay for college. The $95,000 wealth gap between blacks and whites in 2007 means that children of white parents are more likely to be able to afford to go to college debt-free whereas children of black parents will have to assume more debt to attend college. It is this type of reality which demands that communities of color be especially prudent in how we decide to "celebrate" the holidays.

The first thing to remember during this holiday season is that celebrating a holiday does not in itself require high levels of spending. In fact holidays such as Thanksgiving, Christmas, Hannukah, and Kwanzaa all have a spiritual core that can provide you a cost free foundation for your celebration. Whether you are religious are secular, this year let's make holiday celebrations a celebration of family, tradition, and values instead of unsustainable spending and materialism. We all don't want to disappoint our families, friends and most especially our children so start changing expectations now. Let family, friends, and even your children know that this year you want to celebrate the upcoming holidays by spending special time with them rather than a material gift. Check your community newspaper, library, museums, religious institutions etc. During the next few months there are a plethora of activities many of them free that one can use to spend special time with your loved ones and friends.

The word holiday comes from the pairing of the words holy and day. The word holy stems from the Scottish 'hale' meaning health, happiness and wholeness. You, your family and friends will find much more financial health, over all happiness and wholeness if you do not make the holidays days of greater indebtedness and wealth insecurity.

by Mariko Chang, Ph.D. author of Shortchanged: Why Women Have Less Wealth and What Can Be Done About It and Dedrick Muhammad, Senior Director of the NAACP Economics Department