The Financial Acumen of Black and White Families

This study analyzes the behavior of a representative sample of U.S. families in two measures of financial acumen in 1989-94. Budget acumen is success at paying bills on time and maintaining good relationships with creditors. Wealth acumen is achieving increases in family wealth over time. First, in univariate comparisons black families achieve lower levels of budget acumen in most of the measures utilized. However, statistical tests that control for demographic and other relevant variables indicate that the black families’ lower levels of budget acumen can be attributed to traits such as lower education and poorer health rather than differences in the quality of family budget management, per se. Second, black families are less likely to achieve increases in wealth than white families, and the tests show that this can be related primarily to the lower starting wealth and lower labor income of black families. These results indicate that loan scoring models that include the variables herein cannot justify statistical discrimination against black loan applicants; and that the disproportionate concentration of wealth among white families is not due to inferior wealth management by black families.