Investing

We can narrow the racial wealth gap by empowering Black people to invest

By: Zandile Chiwanza on February 26, 2021

While it's not as well-documented in Canada as in the United States, the racial wealth gap has made a few headlines over the past few years. 

We've reported that racialized populations and newcomers in Toronto have not seen inflation-adjusted growth in their incomes in the last 30 years, and we’ve also explained how the Black tax, which refers to the financial support working Black folks are expected to give their families, prevents them from building wealth.

But did you know there's a racial investing wealth gap, too?

While there’s no data focussed specifically on Canada's Black population, a 2019 report from the Canadian Centre for Policy Alternatives (CCPA) reveals a racialized gap in participation and wealth in the investment market.

My parents didn't have access to money to invest. What they could teach me was limited. So I had to learn it somewhere else

According to 2016 census results, 8.3% of Canada’s racialized population over the age of 15 reported capital gains the year prior, compared to 11.9% of the non-racialized population. 

Investment income shows a similar pattern. Only 25.1% of the country’s racialized population reported investment income, compared to 30.8% of the non-racialized population. In fact, the average investment income in 2015 for the non-racialized population ($11,428) was 47% higher than for the racialized population ($7,774).

Barriers Black people face in accumulating wealth

If we’re going to look at closing this gap, we have to look at the systemic hurdles Black people face when it comes to building generational wealth. At an institutional level, there's a distrust of banks, lack of access to capital and credit, discrimination in the labour market, and psychological barriers that impact our interactions with money. 

Take the story of Frantz St. Fleur, a Black Torontonian who, in 2014, sued Scotiabank for allegedly racially profiling him. According to the Toronto Star, St. Fleur was attempting to deposit a $9,000 cheque when the police showed up and arrested him based on suspicion from bank staff that he was depositing a fraudulent cheque.

Black people have also historically been excluded from gaining access to credit. Many American and Canadian lenders were known to practise redlining throughout the 20th century, a Roosevelt-era policy that denied mortgages to people in neighbourhoods where the majority of residents were Black, Indigenous, and People of Colour (BIPOC).

I, like many Black, Indigenous, People of Colour, have inherited a fear of losing money and have a fear of debt

Black women fare worse than their male counterparts when it comes to building wealth. In 2016, another CCPA report revealed Black women earn an average of 59 cents for every dollar that non-racialized men earn. They have a harder time securing well-paid jobs, and are overrepresented in low-income, part-time, and precarious employment — all of which prevents Black women from translating their wages into wealth.

"My parents didn't have access to money to invest," says Lianne Hannaway, the founder of Wealthnuvo, an investment platform for women of colour. "What they could teach me was limited. So I had to learn it somewhere else."

Now armed with 20 years of experience in the financial services industry, and a vocal advocate for closing the racial wealth gap, Hannaway wants her platform to be a place where women can learn how to invest and grow their money. "Especially as Black women," she says. "We don't just impact our lives. We impact the lives of our families and our communities."

"With investing, if you put some money away now and have it grow into the future, you can see an end to your working life," says Hannaway. "I just want that for so many Black women."

Generational trauma and the fear of losing money

But for many Black folks, there’s a significant amount of financial trauma to wade through before realizing their wealth potential and making the leap into investing. 

"A lot of Black people tend to be in survival mode," says Morgan Blackman, the founder of Holistic Bucks, a wealth coaching program.

“That could be because of the environment in which we grew up where we see other people living in poverty, or we don't see people being proactive when it comes to their finances or making good financial decisions."

As a result, says Blackman, “We're only taught one way of handling our finances: save, or go out there and hustle. But we don't know how to have our money work for us.”

Danica S. Nelson knows a thing or two about this. When the senior product marketing manager at Shopify went to invest in the stock market for the first time, she was terrified.

"I, like many Black, Indigenous, People of Colour, have inherited a fear of losing money and have a fear of debt," says Nelson. "And that has always scared me because I just thought that anything to do with the stock market, period, is risky."

Now that she's educated herself a little bit more, it's been a really exciting journey. So much so that she started sharing it with her community. 

All this hard work that you're doing and you're leaving your money in these accounts with very low interest rates, it's going to cost you money in 10, 20, 30 years

A newbie to investing, Nelson has joined several Facebook groups to understand other people's journeys and what they're investing in, specifically from experienced traders.

"It's great to get their insights on mistakes they've made, so I don't make those same costly mistakes," says Nelson. 

She also sees it as a good opportunity for Black people to learn together as a community about resources traditionally not accessible to us.  

How to make your money work for you

If you're still on the fence about investing in the stock market, take some time to investigate where those feelings stem from, then contact a professional to go over your finances or consult with different sources you trust. 

Hannaway's approach to investing is assertive. 

"I invest in things that I know and use, and that I think are going places," says Hannaway. For instance, some time ago she bought shares in Zoom — a stock that has soared as of late due to the pandemic. 

"It goes back to learning about putting your money to work for you," says Hannaway. 

Blackman’s approach to investing stems from challenging her own self-limiting beliefs. Like most people, she used to think you need a lot of money to get started. 

"Start small," says Blackman. "Once you have an account set up, it's about putting in as much money as you can. If it's $10 a week, $10 a month, that's okay. When you get to a point where you're able to scale, and you're able to add in more money, then do so."

"I prefer robo advisors because they tend to be accessible," she adds. "There are usually lower fees."

For Nelson, it's about understanding the cost of inflation and how to make your money work for you, not against you. She explains, for instance, how leaving cash in a savings account with 0.5% interest actually costs you money over time.

"All this hard work that you're doing and you're leaving your money in these accounts with very low interest rates, it's going to cost you money in 10, 20, 30 years," says Nelson. 

“I want to share my learnings so we can all experience the FIRE lifestyle. I want us all to have that.”

 

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