Working Together to Address the Wealth Gap
“…Absent intervention, it will take Latinos 84 years to amass the wealth white families currently enjoy, while for African-American households, it would take an astonishing 228 years to amass the wealth whites have today.” (Racial Wealth Divide Initiative, Corporation for Enterprise Development)
“Women of color experience both a gender wealth gap and a racial wealth gap. The historical legacy of the racial wealth gap in combination with the women’s wealth gap leaves women of color with the least amount of wealth. Single black women have a median wealth of $200 and single Hispanic women $100, less than a penny for every dollar of wealth owned by single white non-Hispanic men.” (Women and Wealth: Insights for Grant-makers (PDF) , Asset Funders Network)
As these excerpts indicate, we continue to see mounting evidence of the complexity of wealth inequality in our communities. That said, we live in a time of unprecedented access to resources, networks and proven strategies to create opportunity. Those who work in philanthropy, banking and community development are poised to work together to address the complexity of wealth gaps.
The Asset Funders Network (AFN) was founded in 2005 to bring together grant-makers passionate about promoting economic opportunity and financial security for all through targeted efforts to reduce wealth gaps and to connect households to market tools that do not strip wealth. Regardless of whether their grant-making targets health or community development, education or housing, microenterprise or workforce, if funders are giving money to increase individual financial security, AFN serves them as a resource.
AFN’s founders use philanthropy to stimulate the proliferation of asset-building initiatives as keys to unlock opportunity and upward economic mobility. While asset-building practitioners and their funders sit on opposite sides of a grant proposal, sometimes with limited opportunity to share information and resources, the content and knowledge-sharing vehicles developed by AFN for funders are designed to be useful for anyone in the field, regardless of which side of the grant proposal equation they work on.
Among our members, asset building is defined as any program, policy or institutional practice that enables individuals, families and communities to build a strong foundation of resources they can draw upon to meet more than their basic survival needs. Financial savings and long-term asset building create the capacity to invest in and plan for the future, and to achieve security, stability, upward mobility and well-being.
Children’s savings accounts (CSAs) are a good example of an asset-building initiative that promises to help close wealth gaps. “CSA” most often refers to a savings account opened for the benefit of a very young child—at birth or by kindergarten age—into which a third party, such as a city, nonprofit, foundation, parent or others can deposit funds that are to be disbursed for postsecondary education expenses. Historically, new CSA programs have required early support from philanthropy to create momentum for broader adoption.
Recent research by the Institute on Assets and Social Policy posits that, “If a universal CSA program had been established in 1979, and if that program had included as part of its design a progressive public investment reaching $7,500 for low-wealth households with incremental declines to $1,250 for the highest-wealth households, median wealth holdings for younger black and Latino households today could have been significantly higher (by $7,450 and $6,100, respectively). Meanwhile, the wealth gap between black and white households for young adults would have decreased by 23%, while the wealth gap between white and Latino households for young adults would have declined by 28%.”
While CSAs are a strong model, there are many more available solutions in both policy and practice to reduce wealth gaps. AFN has developed resources to shed light on both policy and programmatic solutions. Resources include briefs on equity in business enterprise lending to people of color (PDF) and people who are formerly incarcerated (PDF) with case studies on microenterprise from across the nation. AFN’s work examining the scope of the financial coaching field (PDF), as well as how coaches measure and can improve impact, help both financial institutions and community-based organizations discern the relative effectiveness of financial coaching programs in differing contexts.
In May 2017, AFN will host its biennial funder conference in Indianapolis (see Calendar entry). We will engage funders in dialogue about how to accelerate progress in eliminating the wealth gap. Our keynote speaker will be Rev. Starsky Wilson, who may very well be the personification of “funder-community partnership.” As the CEO of Deaconess Foundation in St. Louis, he also heads up Forward through Ferguson, one of the most challenging on-the-ground efforts to reduce inequality in the nation.
In 2017, AFN will release new reports on the integration of immigrants to increase community economic health and prosperity, the bidirectional relationship between health and wealth, and youth entrepreneurship. We will launch a new website to make this material easier to access. While AFN was created to be a resource to funders, we hope that our investment in knowledge will benefit everyone who shares our belief in economic opportunity for all.
Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.
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