Money is the foundation of stability. For women of color, there are institutional and structural barriers to financial education. Women of color make about $0.61 to $0.93 for every dollar made by a white man. In Black and Native American households, women were 40%-60% more likely to be single mother, breadwinners. Women are often the backbone of the traditional family. If women are better educated, these disparities will cease to affect generations of people of color, reinforce an already limited access to a college education, stop the cycle of generational poverty, and for some a dependence on public services and resources.
60-20-20
The 60-20-20 rule is a spin on the 50-30-20 rule. This rule dedicates 60% of your funds to your necessities and basic survival, which includes housing, food and bills. A 20% portion of your income should go to your savings, emergency funds and a Roth IRA, a retirement and investment account that offers tax-free growth. The remaining 20% of your income should be allocated to your wants, specifically dining, entertainment, and shopping. While the 50-30-20 rule is the financial standard, it fails to recognize the inconsistency in income for women of color. Often times, these women are making less than their counterparts; and for people of color from immigrant backgrounds, a portion of earnings may be used to support family members who are underemployed.
Savings
Saving is an integral part of financial stability. Unfortunately, 58% of Americans have less than $1000 in their savings account. As the Social Security Trust Fund begins to dwindle, Millenials and Gen Zs are forced to provide their own safety net. Although they continue to contribute to the fund, people are living longer and older generations will drain any remaining dollars. The average savings account carries an interest rate of 0.10%. If you were to start with an initial deposit of $100, adding an additional $20 a month for 10 years, you would end with a total of $2,512.94. Over 10 years, you’d gross a total of $2,512.94
0.10% Interest Rate, $20 per month, 10 year
On the other hand, a high yielding savings account is an account that pays 20 to 25 times the national interest average. Services like Ally Bank, My Savings Direct, Barclays Bank, and Goldman Sachs Bank USA offer interest rates of 1.7%-2.2% with a $0 minimum balance and no fees. With a higher interest rate there is the opportunity for greater compound interest.
1.7% Interest Rate, $20 per month, 10 years
2.2% Interest Rate, $20 per month, 10 years
Money is necessary to maintain a comfortable lifestyle. Often times, we can get overwhelmed by our responsibilities and unexpected setbacks. With organization, long-term saving, and planning you can create financial stability for your future.
Citations
Anderson, Julie. “Institute for Women's Policy Research Quick Figures.” Institute for Women's Policy Research, The George Washington University, Sept. 2016.
“Best Online Savings Accounts of November 2019.” Bankrate, www.bankrate.com/banking/savings/rates/.
“Gender Pay Gap Ratios, Stats and Infographics 2019.” PayScale, www.payscale.com/data/gender-pay-gap#section03.
Hasler, Andrea, and Annamaria Lusardi. The Gender Gap in Financial Literacy: A Global Perspective J.
Global Financial Literacy Excellence Center, The George Washington University School of Business, July 2017, gflec.org/wp-content/uploads/2017/07/The-Gender-Gap-in-Financial-Literacy-A-Global-Perspective-Report.pdf?x87657.
Holtzman, Tessa, et al. “The Gender Wage Gap: 2018 Earnings Differences by Race and Ethnicity.” Institute for Women's Policy Research, 1 June 2019, iwpr.org/publications/gender-wage-gap-2018/.
“Simple Savings Calculator - Savings Interest & Investment Growth.” Bankrate,
Warren, Elizabeth, and Amelia Warren Tyagi. All Your Worth: the Ultimate Lifetime Money Plan. Free Press, 2006.