How Black families can build generational wealth, according to experts

When Cedric Nash was 26, he received a $10,000 inheritance from his grandmother. He quickly opened up his first brokerage account and invested the money. 

“From my mindset, there was no way in the world I could take this woman’s hard-earned money and squander it,” says Nash. 

That transfer of wealth, which happened at a pivotal time in Nash’s life, is rare in Black communities. Of Black and white Americans between the ages of 47 and 70 in 2019, 

only 13 percent of Black Americans reported receiving an inheritance or wealth transfer, compared with nearly 35 percent of white Americans, according to a report by the Federal Reserve Bank of Richmond. The median amount of wealth transferred was also lower ($74,460) for Black Americans vs. white Americans ($100,830). 

But for Nash, author of the book “Why Should White Guys Have All the Wealth?” and founder of the Black Wealth Summit, that $10,000 inheritance changed the financial trajectory of his life. He went on to start his own IT consulting business, Oakland Consulting Group, and purchase several investment properties, which he says allowed him to achieve millionaire status at the age of 32. 

He learned as much about investing and personal finance as possible, he says, because he wanted to continue the tradition of generational wealth started by his grandmother, who made $200 a month working at a laundromat. 

Systemic barriers to building wealth for Black families

Black Americans have faced countless barriers on the road to building wealth, from lower wages to decades of discriminatory housing and lending practices to a lower level of financial literacy. 

For Black families that want to leave a legacy for future generations, the disparities between Black and white wealth are striking:

• In 2022, the median wealth for Black households was approximately $44,890 compared to $285,000 for white households, according to Survey of Consumer Finance data analyzed by Brookings. 
• The majority of Black households (55 percent) had less than $41,700 in wealth in 2021, according to the Pew Research Center. 
• The average white household’s home value in 2022 was 2.5 times higher than the average Black household’s home value — the same as it was in 1970, according to the U.S. Treasury Department. 
• Black workers ages 51 to 64 are less likely to have a retirement account than white workers, according to a July 2023 report from the U.S. Government Accountability Office. 
• More than 82 percent of all certified financial planners are white. Only 1.9 percent of CFPs are Black or African American, according to March 2024 data from the CFP Board. 

How Black families can build generational wealth, according to experts

We spoke to financial educators, counselors and estate-planning attorneys to learn how people of color can help close the wide racial wealth gap while preserving their assets for future generations. Here’s what they had to say. 

Shift to a wealth-building mindset 

Healing from financial trauma and adopting a positive money mindset are essential to building generational wealth, experts say. 

“Building wealth takes a mindset shift,” says Brandy Baxter, an accredited financial counselor and founder of Living Abundantly Coaching and Training in the Dallas-Fort Worth area. “First, you must admit that building wealth is possible for you, then believe it is plausible, and finally, accept that building wealth is probable.”

Financial trauma, often rooted in systemic inequality and generational poverty, can lead to a lack of participation in financial systems, a general mistrust of financial products and a fear of taking financial risks, like investing or starting a business. 

“A misconception I’ve heard clients share is their distrust of the stock market because it’s risky,” says Baxter. “When people have limited resources, they focus on their immediate needs. Investing and building wealth can feel like a waste of money because immediate needs demand their limited resources.”

Don’t get caught up in a spending culture  

Lawrence Delva-Gonzalez was raised in Port-au-Prince, Haiti and came to the United States when he was 11 years old. Delva-Gonzalez, who now works as a federal auditor in Washington, D.C. and runs a personal finance blog called the Neighborhood Finance Guy, says he emulates the work ethic and money-saving habits of his mom and grandmother — lessons he believes younger generations can learn from.  

He says understanding where the money is going helped him save more and put those extra savings toward investing and paying down debt. 

“I don’t think a lot of people are doing that budgeting leg work anymore,” he says. 

Nash agrees that younger people can learn valuable financial lessons from past generations. 

“My grandmother may have had a sixth grade education, but she had a millionaire’s mindset about living below her means, putting her money away and being prepared for a rainy day,” says Nash. 

Finding ways to boost your income is also essential, whether that’s asking for a raise, getting a higher-paying job or taking on a side hustle. 

Nash created a program called the Black Wealth Growth Challenge aimed at helping Black men increase their net worth. He says that the first step is looking for ways to “create space” in your budget by boosting your earnings. 

“Where we are financially is not our fault, but it’s our responsibility to fix it and we have to take ownership of it,” says Nash. 

Investing in the stock market

Black Americans are underinvested in the stock market, compared to white Americans, by a wide margin: Stock equity made up nearly 30 percent of white wealth but only 4 percent of Black wealth, according to 2024 research by Brookings. 

But investing is key to building generational wealth, experts say. That’s because stock tends to appreciate more quickly than other kinds of investments, even housing equity. 

Both Nash and Delva-Gonzalez believe people shouldn’t wait until all their debt is paid off or they land a higher-paying job to start investing. 

“You’ve got to invest regardless of your financial situation, even if it’s just $5 or $10 a week,” says Nash. “It trains your mindset to always put money away for you.”

Advice offered by financial personalities such as Dave Ramsey, who implores followers to wipe out their debt before investing, isn’t great for the average person, especially younger people. 

“The reason why people struggle financially is they’re too fired up about paying off debt and not fired up about investing,” says Nash. “I’m not saying you ignore your debt. I’m saying put it on auto-pilot.”

With inflation and rising housing costs, Delva-Gonzalez sees investing as “mandatory.” 

“You cannot wait until tomorrow to do it,” he says. “You have to do it as soon as possible.”

Start investing with tax-advantaged retirement plans

A workplace 401(k) plan is one of the most frictionless ways to invest. Workers allocate a portion of their paycheck to the tax-advantaged retirement account, build their portfolios using a shortlist of mutual funds and target-date funds, and the money gets invested automatically. 

Many employers offer a matching contribution up to a certain percentage of salary (usually 3 to 5 percent), which Delva-Gonzalez says is invaluable in building wealth. 

“I think a lot of people dismiss the match, thinking well, it’s only an extra $3,000 a year (or $250 a month), so it’s not that important to get the full match,” he says. “But after 30 years, that matching contribution would be worth over $350,000, assuming an 8 percent return.”

Contributing to a traditional 401(k) also reduces your adjusted gross income, which can save you money at tax time and help you qualify for certain government programs, such as income-driven repayment plans on student loans, he says.  

“This is what makes people wealthy. The idea that they’re using their money to do two things at once — lowering your taxes and then also growing your wealth,” says Delva-Gonzalez.

For those without access to a workplace retirement plan, individual retirement accounts (IRAs) offer similar tax breaks and a wider selection of investment options. Many of the best online brokers offer IRAs with zero minimum balance requirements and no trading fees or commissions. 

While they still lag behind white investors, more Black Americans, especially younger ones, are starting to invest for the first time. Since 2015, the percentage of new Black investors has increased 9 percentage points while the percentage of new white investors has not changed substantially, according to a recent report from the Financial Industry Regulatory Authority. 

Buying — and holding — real estate

Real estate is a classic wealth building vehicle, but systemic racism within the housing industry has long kept communities of color from accessing fair housing opportunities. From redlining to the racial gap in home appraisals, it’s historically been harder for Black Americans to buy and hold property. 

But one property in particular represents true generational wealth for Nash — his grandmother’s home. 

According to Nash, his grandmother purchased the home in the Bronx in the 1950s for $25,000. When his grandmother’s second husband died in 2012, he willed the home to Nash, who soon realized the property had a reverse mortgage on it. 

Nash spoke with an estate planning attorney who told him there probably wasn’t much value in the home and he should let it go, he says. 

“But I couldn’t let it go,” Nash adds. “For me, it’s a matter of preserving what my grandmother started.”

So Nash went through the process of buying back his grandmother’s home for around $315,000. Nash currently rents out the property, which is now valued at $625,400, according to Zillow. 

“We can’t build wealth if we lose grandmother’s house, right? We can’t do that,” Nash says. “We have to preserve it.” 

But homeownership remains out of reach for a majority of Black Americans. The homeownership rate gap between Black and white Americans was the same in 2020 as it was in 1970 — two years after the passage of the Fair Housing Act of 1968, according to the U.S. Treasury Department. 

Be proactive about aging parents

An ongoing obstacle to building generational wealth for many people of color is financially supporting aging parents. Research by the St. Louis Fed found that college-educated Blacks are nearly three times as likely to financially support a parent as college-educated whites.

Instead of being able to pass money to the next generation, wealth transfers often go in the opposite direction.

“A lot of Black and brown people don’t have the luxury of an inheritance,” Delva-Gonzalez says. “We typically pick up expenses and liabilities.” 

Delva-Gonzalez and his wife are all too familiar with this situation. 

“I’m constantly kind of worried about our parents,” he admits. 

As immigrants who experienced limited job opportunities, low pay and discrimination in the financial system, their parents didn’t have the same access to financial education or the same opportunity to save money, says Delva-Gonzalez. 

“The prior generation only had so much,” he adds. 

Delva-Gonzalez says he’s seen a lot of his peers express frustration at their parents’ lack of retirement planning, and the financial stress it’s causing their families. 

But Delva-Gonzalez and his wife feel a sense of responsibility to take care of their parents, though he estimates the cost of doing so will be substantial. 

“I don’t think it’s fair to be angry at people that did nothing but work,” he says. “The best I can do now is to try to give them an honorable exit instead of giving them a hard time.”

Neither his mom nor his wife’s parents have any savings, he says. So the couple is planning to pay the remaining $100,000 debt on his father-in-law’s house in Florida to help preserve it as a family home where multiple generations can live. 

“I think especially for millennials, we need to get on board with our own personal finances and knock that out as soon as possible,” says Delva-Gonzalez, who points to investing, building an emergency safety net and paying off high-interest debt as top priorities. 

“This way, we can create some space financially with the understanding that in the near future, we will have to start picking up these additional costs to help our parents,” Delva-Gonzalez says.

Protect your assets with estate planning

Ultimately, accumulating wealth doesn’t help the next generation if critical assets aren’t passed down properly. 

A will is an essential part of estate planning that outlines who receives your assets after you die. It won’t prevent your assets from going into probate — a lengthy legal court process — but it can ensure that intended beneficiaries receive the family home and other assets. 

“If you don’t have a will, essentially you don’t have a plan — but the state will have a plan for you,” says Jamy Barreau, managing attorney at Barreau Legal in Port St. Lucie, Florida. 

The default distribution when you die without a will is known as intestate succession laws. Barreau points out that it might align with your wishes — or it might not. 

State laws can vary, but spouses are usually first in line to receive assets, though if there’s a spouse and children, the inheritance might be split between them. If there’s no spouse, then children typically inherit the entire estate, though if a child has already passed away, then their share might pass to their children (grandchildren of the deceased).

Things can get complicated fast. Without a will, multiple heirs may receive fractions of a home’s value. This situation can lead to trouble if the partial owners have a strained relationship, some of them have been living in the deceased person’s home, or if heirs don’t agree on whether to maintain the property or sell it.

“You could solve a lot of bickering for your loved ones if you have your wishes written down,” says Barreau. 

Beneficiary designations are the easiest and least expensive way to transfer intergenerational wealth. You can assign family members to retirement accounts, life insurance policies and brokerage accounts, and those designations take precedence over a will. For bank accounts, you can fill out a transfer on death (TOD) form, so that the money in your checking and savings is made immediately available to your designated beneficiary after you pass away. 

Trusts are another way to transfer wealth. They’re more complicated to establish than a will, but they can pass down assets outside of probate. Trusts can include specific terms about how and when assets are distributed, such as giving a grandchild an inheritance when they turn 25 or after they graduate college. 

But estate planning can be an uncomfortable topic in some families. 

“In my experience, there can be misconceptions and less awareness about estate planning in the Black community, including uncertainties about how to hire a lawyer and concerns about costs,” says Jadinah Gustave, managing attorney at The SG Law Firm in Miami. 

Her advice? Start by researching local estate planning attorneys who specialize in serving diverse communities on sites like blacklawyers.com and Justice Connection, or by reaching out to your local chapter of the American Bar Association for assistance. Seeking recommendations from friends and family can be helpful, too.

All of these steps can ensure a more prosperous future for your family, says Barreau, who was inspired to specialize in estate planning law after witnessing heated family disputes over land inheritance in Haiti. 

“Generational wealth is not necessarily Rockefeller or Carnegie kind of wealth,” says Nash. “It’s also the mindset and the values that one generation instilled in the next.”