African-Americans Dip Into Savings to Survive Recession

They say when the rest of the world catches the cold, the Black community catches pneumonia.

Such is the case with the current economic downturn. While the housing crisis has hit all of America hard, foreclosures have wiped out billions of dollars in Black wealth.

The current national unemployment rate hovers at 9%, but approaches a staggering 15.4% for Black America.

News from the recently released Ariel Black Investor Survey paints an equally grim picture.

According to the study which surveyed 501 Black and 505 White households earning over $50,000 annually, nearly half of all Blacks (compared to 31% of Whites) were forced to dip into savings in order to make ends meet during this recession.

Black households were also more likely to cut back on savings. The median amount saved by Black household each month was $189, compared to $367 for White households. This marked the first time in ten years that Black families in the survey saved less than $200 a month.

According to Ariel president Mellody Hobson, “In times of economic hardship, people have to make difficult decisions. Unfortunately, the resulting trade-offs mean many in our community are slipping even further behind.”

The Ariel survey also highlighted Black America’s continual decline in stock ownership. This year 60% of Blacks surveyed were invested in the market, down from 68% in 2004, while White participation in the stock market remained steady at 79%.

Unfortunately many African-Americans may have pulled back from the stock market at the wrong time as some inevitably missed out on the stock market rebound. They’ll continue to miss out on gains as the stock market improves.

The key to wealth building is long term investing over years and decades. Yet that’s easier said than done when the choice is between investing in your 401K or putting food on the table.

Other results of the survey:

• Eighty percent of the Blacks surveyed said they cut back on spending in the last two years.
• 60% or the Blacks surveyed (compared to 37% of Whites) had been asked for financial help by family or friends.
• Twice as many Blacks as Whites have been unable to secure a car or home loan.
• Blacks were five times as likely (5% compared to 1%) to face or have already gone into foreclosure.

Despite the hit Black households have taken during the last two years, they remain optimistic about the future, even more so than the rest of the country.

Seventy-five percent of African-Americans describe themselves as “hopeful” about the U.S. economy with only 41% of Whites feeling the same way.

What about you? Have you dipped into savings to keep afloat? Are you optimistic about the future? Do you see things getting better anytime soon?