Pervasive financial insecurity among American households threatens the future of our families, communities, and the nation’s economic prosperity. The ability to earn and accumulate assets determines whether families can leave poverty behind and achieve economic security. Assets include both tangible and intangible resources such as cash savings, a college education, stocks and bonds, or a home. Without assets, families may be able to subsist day-to-day, but will not be able to cope with a financial emergency, save for their children, or invest in a better future.
The larger, interconnected systems and institutions that weave throughout our lives can support or inhibit a family’s ability to improve their financial security. In fact, specific features of some systems actually strip assets and wealth from the most vulnerable families and communities, increasing their financial insecurity and deepening poverty.
The persistence of poverty is intimately connected to the enormous wealth gap that divides our nation. The top 10 percent of households possesses three-quarters of all the wealth in America. The vast majority of all people in the United States, the bottom 80 percent, account for only 13 percent of the nation’s wealth. The racial wealth gap—the difference in net worth between households of color and that of their White counterparts—is even more acute. White households own 13 times the wealth of Black households and 10 times the wealth of Hispanic households. The loss of wealth that occurred during the Great Recession compounded the wealth gap. While wealthier families are recovering, many lower–income households and households of color continue to experience decreasing net worth.
By 2042, America will be a people-of-color nation; yet, historically, people of color have faced barriers to saving, investing, and preserving financial assets. The impacts of wealth inequality are far reaching and contradict the core American values of equal opportunity, hard work, and upward mobility. While the wealthiest families accumulate disproportionate benefits from the expanding economy, millions of families at the middle and bottom of the economic ladder are living in a state of perpetual financial insecurity. These families are surviving on a day-to-day level, but they cannot cope with a financial emergency or save for the future. In fact, almost half of all American households, and two out of three households of color, do not possess sufficient savings to sustain themselves for a minimum of three months if their income is disrupted; and one-third of African Americans and Latinos do not own any financial assets.
Our solution to the problem of wealth inequality and the racial wealth gap is equity. Equity is the antidote to inequality because it embraces our diversity and works to reverse trends so that everyone can more fully participate in our economy. Diversity is our greatest asset, our competitive edge in a world without boundaries. That vision informs a policy agenda driven by equity, fairness, and inclusion.
Our prosperity depends on an equitable economy rooted in communities of opportunity. Achieving this goal requires a new set of policies and strategies at community, regional, state, and national levels. These policies and strategies must ensure that, over their lifetimes, all Americans have access to higher education; livable-wage jobs; health resources; and opportunities to save, invest, and preserve financial assets.
In communities across the country, public, private, philanthropic, and nonprofit sector leaders are designing policies to expand and protect financial opportunities for families to save and invest in themselves and in their communities. They are working on all fronts of a continuum of financial capability that includes learning about options, accumulating resources, investing to make money go farther, and preserving against losses and predatory practices.
This section highlights key policy recommendations detailed in the PolicyLink report, Breaking the Cycle: From Poverty to Economic Security for All. Please see the full report for background and detail, including footnotes, for each of the proposals.