Why Financial Security Matters?

Asset-building practices, programs, and policies are those that create and protect opportunities for low-income individuals, families, and communities to save and invest in themselves, their futures, and their communities. A healthy, thriving economy is one in which everyone can participate and prosper. This site lifts up policies that address wealth inequality and the racial wealth gap and connects those policies to community and economic development strategies—this connection serves to help you understand how to create financial mobility for families and stronger local, regional, and national economies.

What are financial assets and why do assets matter?

Financial assets include cash savings, investments in stocks, bonds, and mutual funds. Homeownership, business ownership, and owning real estate are also assets. Assets help families weather financial crises, invest in their children and their communities, plan for a secure retirement, and pass resources on to future generations.

Assets are the basis of building wealth, which is what a family owns minus what they owe. Assets matter because they provide mobility for families, but also because when families do not have or lose their assets, the national economy suffers. According to CFED, nearly half of American households do not have enough emergency savings to cover basic expenses for three months of unemployment. By this definition, two-thirds of households of color are asset poor.

What is wealth inequality?

Historically, the pathway to long-term financial security has featured an infrastructure of opportunities supported by public policies that enabled working families to build financial assets. As examples, the Homestead Act and the 1944 GI Bill of Rights and, more recently, the home-mortgage tax deduction and work-based health and retirement benefits have encouraged savings and investment.

Despite popular belief, the richest 20 percent of Americans own 84 percent of all wealth and this has been a statistic a long time in the making. According to the Urban Institute, over the last 30 years, high-wealth families (the top 20 percent by net worth) saw their average wealth increase by nearly 120 percent between 1983 and 2010, while middle-wealth families’ average wealth increased by 13 percent, and the lowest-wealth families saw their debts exceed their assets. This trend has been supported by national policy. Of the nearly $400 billion in federal tax expenditures to support household savings and investment in 2009, the wealthiest 5 percent of taxpayers received more than half of the benefits, while the bottom 60 percent of households received less than 5 percent of the benefits.

What is the racial wealth gap?

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. This has created a steadily growing racial wealth gap -- rooted in discrimination and supported by policies that disproportionately benefit wealthier households, while offering limited opportunities for low-wealth families. This racial wealth gap is a detriment to the growth and prosperity of the economy.

Since the start of the Great Recession in late 2007, falling home prices and rising unemployment rates have led to unprecedented wealth loss for people of color. The Pew Research Center shows that from 2005 to 2009, median wealth fell by 66 percent among Hispanic households and 53 percent among black households, compared with just 16 percent among white households. Again, this point in time has historical precedent. Researchers at the Institute for Assets and Social Policy illustrate that between 1984 and 2009, the wealth gap between white and African American households has nearly tripled in large part due to fewer years of homeownership among African American households, slower rates of income gain and higher rates of unemployment, challenges related to college access and completion, and lower levels of inheritance.

Creating an Opportunity Economy

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.