Monday, October 19, 2020

Inheritances Fuel Wealth Disparity

The median net worth of Black householders under age 35 was just $600 in 2019, according to the Survey of Consumer Finances (SCF). This is just a fraction of the $25,400 median net worth of non-Hispanic white householders in the age group. The wealth gap does not disappear with age...  

Median net worth of Black and non-Hispanic white households by age of householder, 2019
      Black    non-Hispanic white
Under age 35          $600              $25,400
Aged 35 to 54     $40,100            $185,000
Aged 55-plus     $53,800            $315,000

One reason for the wealth gap between Blacks and non-Hispanic whites is disparity in the intergenerational transmission of wealth, according to an analysis by the Federal Reserve Board. Non-Hispanic white households are much more likely than Black households to receive financial gifts that boost their net worth—such as funds to pay for college or help buying a house. Non-Hispanic whites are also much more likely than Blacks to receive an inheritance.  

A substantial 30 percent of non-Hispanic white households have already received an inheritance, according to the 2019 SCF. Only 10 percent of Black households have received one. Non-Hispanic white households are also more likely than Black households to expect an inheritance in the future—17 versus 6 percent. These inheritances are often the seed money that helps parents gift their children with college tuitions and downpayments. And so it goes. 

Source: Federal Reserve Board, Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances

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