Maxwell Arias Explores Financial Literacy as a Way to Combat Wealth Disparities

Learning About Finance Can Fight Wealth Disparities Across Various Groups and Communities explains Maxwell Arias

Wealth disparities are found all across the country, particularly among Black and Latino communities. These wealth disparities are generational. Maxwell Arias, a student at The Wharton School, explores how financial literacy can be used to combat the disparities.

“Having a strong grasp on personal finances and ways to save, budget, and invest from an early age may be the best way to combat intergenerational wealth disparities. A savvy propensity to save and invest could start ameliorating some of the wealth disparities that have arisen through certain groups having better access to property and education for generations,” explains Maxwell Arias.

According to Pew Research, there is a black-white income gap of approximately $33,000 – and that has grown from $23,800 in 1970. When many Black communities are asked about their financial literacy, they come up short. This is why Maxwell Arias explains the importance of teaching financial literacy.

Max Arias WhartonAdditionally, when looking at surveys conducted by the FDIC, those who lack access to loans and banking services are disproportionately Black and Hispanic. Although the numbers are declining year after year, the numbers are considerably higher in those two groups in comparison to Asian or Caucasian background. Maxwell Arias argues this is in part due to a history of discriminatory policies such as redlining.

Often, certain groups aren’t taught about the importance of saving and investing. “Instruments like exchange-traded funds are great ways to get access to market returns without taking on the risks and ambiguities of actively managed investments which often turn away novice and first time aspiring investors,” says Maxwell. 

Additionally, financial literacy can be used to overcome many of the generational crutches. Maxwell Arias points out that many people who make a lower income are on welfare and other government subsidy programs. In certain circumstances where opportunities are sparse, it can be argued that they are on such a program because their parents and grandparents were on the same programs. 

“Through financial literacy and a long term investment outlook,” Maxwell Arias argues, individuals can potentially set up a path towards future financial stability. They will have the ability to manage a budget, pay bills on time, improve their credit score, and become a homeowner. It can also lead to understanding how to pay for college and plan for retirement, leading to higher earnings and a better overall quality of life.

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