The pandemic placed financial pressures on many Americans, but not all groups have been affected equally. Studies show the wealth gap has widened, leaving the ultra-wealthy in a better position and placing Black and Latino households, in particular, in a worse state than before the public health crisis.
A new poll from online life insurance company Bestow sought to understand how experiencing the COVID-19 crisis has impacted the financial mindsets of Black Americans. According to respondents, the top financial lesson (21% of those surveyed) learned from the past two years is to prepare for the unexpected as 31% of Black households reported losing their life savings during the crisis.
The disproportionate financial impact
In a recent survey from Affirm, the average adult reported worrying about money at least six times a day. Inflation in utilities, food and housing prices have affected the bottom line for many consumers and increased everyday concerns about financial stability.
But for Black Americans, the pandemic only exacerbated a preexisting issue. In 2019, the Federal Reserve reported that the typical white family in the U.S. had eight times the wealth of the typical Black family, putting white Americans in a much stronger position to weather the oncoming crisis.
In April of 2020, 44% of Black Americans told the Pew Research Center that they or someone in their household had experienced job or wage loss, compared with just 38% of white adults, and 73% of Black Americans said they did not have three months’ worth of emergency savings, versus 47% of white respondents. In December 2021, Black households reported paying more for financing in the past year than other households.
According to the CDC, Black Americans have also experienced 2.5 times the COVID-19 hospitalization rates of white Americans and 1.7 times the death rate.
Black Americans’ changing views
With 21% of respondents to the Bestow survey saying that they need to better prepare financially for an unexpected job or income loss, here are the ways they shared how they hope to plan to be better prepared for future financial emergencies:
- 15% want to save more money per paycheck
- 14% want to reduce the amount of debt they’re carrying
- 13% expressed a need to purchase life insurance to protect against an unexpected loss of a loved one
- 12% said they need to save more money for unexpected health care expenses
- 10% want to reduce fixed monthly expenses, such as car payments and phone bills
For many of the participants in the Bestow survey, their financial safety net may also have been depleted during the pandemic due to the death of a loved one. When asked how they would cover a future emergency expense such as the loss of a family member, here’s what respondents said:
- 30% would go into debt with a funeral home payment plan or credit card debt
- 30% would rely on community funding through friends, church or a service like GoFundMe
In the event of a funeral, an unprepared consumer could be faced with tough financial choices that will make matters worse. Funeral loans can come with ultra-high fees, including origination fees up to 8% and interest rates up to 35% or higher.
When faced with such a crisis without life insurance, financial advisors may encourage alternatives, including comparison shopping for a funeral discount or applying for a Payday Alternative Loan (PAL) at a local credit union.
Methodology: An online survey of 565 U.S.-based, self-identified Black Americans was fielded between Jan. 27-31, 2022, with a median age of 35 and a personal annual income of $45,000. Of these respondents, 66% had financial dependents.