Investing can create generational wealth for Black families
Generational wealth holds real significance for many Black Americans. Our community has historically faced structural barriers that have prevented many families from building long-term wealth.
How to start investing: Everything you need to know
The idea of investing your money can be a bit intimidating. Here is everything to know about how to start.
- Building generational wealth is a significant financial goal for many Black Americans, who have historically faced barriers to wealth accumulation.
- Investing, rather than just saving, is crucial for building long-term wealth due to the power of compounding.
- Creating a financial plan, investing consistently, and seeking professional advice are key steps to successful investing.
What is the purpose of your money? Think about it.
It’s a personal question, and we each have our own vision in mind. In the Black community, many of us would probably mention building generational wealth as a financial goal. According to J.P. Morgan Wealth Management’s latest Diverse Investor Study, 72% of Black investors surveyed say building generational wealth is what motivated them to start investing their money.
What do we mean by “generational wealth” and how can investing help create it? I like to compare it to a marathon. The next generation can begin running right at the starting post. But if you pass down wealth, you can help give them a head start and put them closer to the finish line. Generational wealth is assets you transfer to future generations, whether that’s your children, grandchildren, other family members or close friends.
Generational wealth holds real significance for many Black Americans. Our community has historically faced structural barriers that have prevented many families from building long-term wealth. In fact, the typical Black family has $15 for every $100 of wealth held by the typical white family, according to the Federal Reserve in 2022.
Black investors are making education a top priority
The good news is that Black investors are taking charge of their financial future and the futures of the generations after them. According to our research, 82% of Black respondents said they were contributing the same amount or more toward a 529 account, a tax-advantaged investment account that can be used to pay for qualified education expenses, than the year before, which was 11 points higher than respondents overall. Education is often viewed as key to economic mobility. For many Black Americans, it is a top priority, and they are aligning their investment strategy with it in mind.
If your goal is to build long-term wealth and pass some of it down to future generations, you probably can’t rely on saving alone. Investing can be a powerful strategy to help you build wealth in the long run. This is thanks to a principle known as compounding, where your money accrues interest on top of the interest that you’ve already earned, which allows the new amount to grow at a quicker pace.
Investments don’t always go up. But the earlier you start to invest, the more time your money has to potentially compound and grow in the long term. The amount of time your money is invested in the market is a major factor. The sooner you can get started, the better.
Tips to kick off your investing journey
If you’re looking to start investing, here are a few tips to keep in mind:
Create a plan for what you’re working toward:
Chances are you have a variety of different financial goals with different timelines. Maybe you want to purchase a home in the next five years while also working toward your long-term goal of building generational wealth to leave behind. A plan can help you outline how to work toward each of your various priorities. In other words, it provides a roadmap to help you get there.
Our Diverse Investor Study found that planning can pay off. Respondents who created a plan for their financial goals are more likely to say their financial situation has improved in the past five years, rate their financial health highly and have conversations with their kids about money.
Aim to be consistent with your investing:
You don’t need a lot of money to invest. But once you get started, consistency is key. Being consistent with your investment contributions, whether they’re big or small, can help you stay on track toward your goals.
Remember, you don’t need to do it alone:
Everyone has their own preference for how they manage their money. For some people, it can be helpful to work with a professional. A financial adviser can partner with you to build a customized plan for your specific goals and help you throughout your journey in working toward them.
Josh Lowery is a Private Client Advisor at J.P. Morgan Wealth Management in Jeffersonville, Indiana, and serves the Louisville community.
J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC.
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