What Is Financial Literacy?
The definition of finance is the management of large amounts of money, especially by governments or large companies. (Oxford Languages, n.d.) However, this definition is what finance evolved into. The word’s etymology shows that it originated from the Old French “finer” which means to settle a debt. (Merriam-Webster, n.d.; Online Etymology Dictionary, n.d.) Literacy in this sense means to be competent in a specified area. Putting what we know of the definitions together, financial literacy is being competent in managing money and settling debts. (OECD, 2018)
Many will tell you that debt should be leveraged so that you can maximize gains when investing, claiming to follow the lead of those that are successful. This strategy is used by successful entrepreneurs and investors, of course, but their debt is only a liability on paper. They usually have assets set aside that can be used to pay that ‘debt’ off which greatly reduces the risk of their investments and can limit losses as well. This aligns with balance-sheet leverage theory, where debt is backed by income-producing or liquid assets (Damodaran, 2020). So, settling debt is not really a problem here.
What becomes a problem is when you invest with debt, lose and then have to settle that debt with something more valuable. What I’m talking about here is your time. Your time is limited, precious and worth way more than money. When we live in debt a great portion of our time has to be spent to work towards paying that back. Economists often refer to this as “time poverty,” where financial obligations reduce discretionary life choices (Goodin et al., 2008).
In many religions they teach about the pitfalls of debt. The Bible states in Deuteronomy 28:12: “You shall lend to many nations, but you shall not borrow” (ESV). Then Proverbs 22:7: “The rich rule over the poor, and the borrower is SLAVE to the lender” (NIV). Then in 2 Kings 4:1-7 Elisha helps a widow pay her debt by multiplying oil, showing God’s provision to free people from debt’s bondage. Biblical scholars widely interpret these passages as warnings against long-term indebtedness and dependency (Brueggemann, 2016).
Let’s look at some other sacred texts and teachings. The Vedas states that not paying a debt results in karmic consequences that can affect other lives and generations (Radhakrishnan & Moore, 1957). Buddhism states that there is a type of bliss that is achieved by being free from debt and is available to a homeowner. It is called ananasukha, the happiness of being free from debt. (Anguttara Nikāya 4.62; Bodhi, 2012). In the Qur’an 2:275:“Allah has permitted trade and has forbidden interest (riba).” Interest however is how most modern loans are done. In many West African societies, pawnship was practiced when someone is in debt. This meant that someone, usually from your family, would have to work for the creditor until the debt is paid (Lovejoy & Richardson, 2001).
This is still how we operate today though the creditor gives much more choice in what job you choose to do, allowing us to believe that these choices are freedom. If you borrow money for school, a car, or a house, you and whoever cosigned are responsible for paying and though the bill comes as money, you are truly paying with time. especially when you do not have passive income-generating assets. This time that could be better spent doing what you love or with loved ones. Even scientific studies, show debt is associated with increased stress, reduced well-being, and constrained life planning (Sweet et al., 2013). Retirement after 65 years old is not when we were meant to travel the world and explore the curiosities of our human nature.
Religion is often a very divisive topic, but when all the religions are saying debt is to be avoided or paid off, expeditiously, we should take notice.
Circulation of Money and Community Wealth
We need to be financially literate and learn to multiply oil so we can free ourselves from bondage. The first thing we need to recognize is that wealth is not a bad thing. We often hear in our communities that when someone becomes wealthy that they sold their soul, diminishing how tirelessly they worked to reach their goals and giving yourself an excuse to not do the same.
While exact time-based measurements are not formally tracked by federal economic agencies, extensive research shows significant differences in community-level retention of wealth driven by ownership, access to capital, and supply-chain control.
African American Community: Often cited as hours rather than days
Jewish Community: Frequently cited as weeks
Asian Community: Frequently cited as weeks or longer
White Community: Longer circulation due to ownership of institutions and assets
- Black-owned businesses make up ~2–3% of employer firms while Black people are ~13% of the population (U.S. Census, 2022). Black households hold ~15–20 cents of wealth per $1 held by White households (Federal Reserve SCF, 2022). Majority-Black neighborhoods have significantly fewer locally owned grocery stores and banks (USDA; FDIC)
Economists emphasize that dominant-group wealth circulates longer because of asset ownership rather than spending habits (Darity et al., 2018).
The Legislative Policy Division of Detroit (2023) reported, “The sad truth is that black people in America have about a $1.3 trillion gross national income, but only 2% of that money, about $26 billion, is re-circulated in the Black community.” (City of Detroit Legislative Policy Division, 2023) and that is only for a few hours. They also state that this is directly linked to desegregation. Scholars similarly note that desegregation without parallel ownership led to capital outflow (Muhammad, 2019). In addition, I would like us to consider lack of education in the fields of business, finance, economics and majors that fall under these departments, so that we remain solution focused.
Summary of Major Distribution by Race
(Based on NCES and NSF postsecondary degree completion data, pooled across recent years; percentages rounded)
| Field | White | Hispanic | Asian | Black |
| Business (General) | ~60% | ~16% | ~9% | ~10% |
| Economics | ~61% | ~3.5% | ~4% | ~5% |
| Finance / Accounting | ~59% | ~7–9% | ~9% | ~7% |
(National Center for Education Statistics [NCES], 2022; National Science Foundation, 2021)
The data shows that Social Work, Criminal Justice, Health Administration and Sociology are favored majors by the black community and highlights the intentions of us caring for each other and stepping into positions to shield each other where the system fails. (NCES, 2022)
I’d like to premise this next statement by writing that nothing is wrong with this and this is why I love my people, but we need to consider our financial responsibility to our community as well. We need to build programs where we benefit from the money we earn for longer than just a few hours. When we die, we need to leave something behind for our families and I don’t mean debt and funeral expenses.
Reasons Money Doesn’t Stay in Our Community Long
Black and Hispanic people earn about $300–$600 less per week than White and Asian people on a weekly average, in a survey of full time workers (U.S. Bureau of Labor Statistics, 2023). A large portion of these earnings go directly toward debts like mortgages, car payments, student loans, personal loans and credit card debt where the lenders are not black. Over 90% of U.S. banking assets are held by non-Black-owned institutions (FDIC, 2023).
After adding up all these debts most have very little to spend. It’s likely that there aren’t any black-owned groceries nearby so food money doesn’t stay in the community either. Black-owned grocery stores represent less than 1% of U.S. grocery retail (U.S. Census Bureau, 2021). Utilities are almost 100% white-owned in the US, phone services and internet are the same. Major utilities and telecom providers are overwhelmingly non-Black-owned Fortune 500 firms (SEC filings; Fortune, 2023).
We have a few designers but don’t manufacture the cloth so even after supporting black clothing brands the lion’s share goes out of our community. Manufacturing and textile production is largely offshore or owned by multinational firms (U.S. International Trade Commission, 2022).
Profitable black businesses often take loans that have higher interest rates because of less experience, they are seen as a risk. Studies show Black-owned firms are more likely to be denied credit and charged higher rates even when controlling for risk (Federal Reserve, 2021). Then if they manage to pay these loans off and remain successful then they are quickly acquired by a non-black firm with an offer they can’t refuse (Bates & Robb, 2016).
Black success is often framed as an individual escape from poverty and not a collective build. A conscious effort needs to be done to reverse these effects. As much as some say we need to work harder, that’s not the real problem. These white owners and lenders are not reinvesting into our communities after billions, sorry trillions are spent. The racial wealth gap persists despite increased labor participation, indicating structural rather than effort-based causes (Darity et al., 2018).
Moving Toward Solutions
I’m not one to simply call out flaws though. I have solutions in mind that lead to the creation of this non-profit organization Àṣẹ Society. In order to incentivize business owners and our community to circulate money longer the Business Network was created. Black owned businesses can now apply to join the network for free and offer discounts to our members on the Business Directory. This will increase visibility and the amount of clients/customers black owned businesses have. It will also encourage black business owners to connect with each other, and it is my hope that these connections help them fill supply and service gaps further keeping the black dollar circulating. After we get as many black owned businesses as possible on this list, we will analyze opportunities for new businesses by location that our members will be able to take advantage of. Joining the business network also gives businesses access to free quotes for group life insurance which helps cover the expenses of death. This is a great benefit that many consider before choosing where they work and because the coverage is for a group of working individuals, the risk is lower and therefore the cost of this insurance is much cheaper than if everyone got an individual policy.
The individual membership starts free as well and will allow access to the business directory where some businesses will have discount codes, free educational resources and free life insurance quotes. There is currently a free course available that covers the basics of life insurance as there terms are very confusing without a background in the field. I urge everyone that is reading this to take a look at our mission and vision. Every person and business that signs up, whether paid or free membership, help us keep the black dollar in our community longer. A few hours with our money is not enough.
References
Anguttara Nikāya. (2012). The numerical discourses of the Buddha (B. Bodhi, Trans.). Wisdom Publications.
Bates, T., & Robb, A. (2016). Why are African American businesses less successful? Journal of Economics and Finance, 40(3), 493–507.
Brueggemann, W. (2016). Money and possessions. Westminster John Knox Press.
City of Detroit Legislative Policy Division. (2023). Black economic equity report. City of Detroit.
Darity, W., Hamilton, D., Paul, M., Aja, A., Price, A., Moore, A., & Chiopris, C. (2018). What we get wrong about closing the racial wealth gap. Samuel DuBois Cook Center on Social Equity, Duke University.
Federal Reserve System. (2021). Small business credit survey: Report on employer firms.
Goodin, R. E., Rice, J. M., Parpo, A., & Eriksson, L. (2008). Discretionary time: A new measure of freedom. Cambridge University Press.
National Center for Education Statistics. (2022). Digest of education statistics: Degrees conferred by race and ethnicity.U.S. Department of Education.
Organisation for Economic Co-operation and Development. (2018). OECD/INFE toolkit for measuring financial literacy and financial inclusion. OECD Publishing.
U.S. Bureau of Labor Statistics. (2023). Usual weekly earnings of full-time wage and salary workers by race and ethnicity.