Wednesday, February 27, 2013

New Study Says Real Estate at the Heart of Wealth Gap

A new study out today from the Institute on Assets and Social Policy has found that the wealth gap between white and black families is primarily the product of real estate and low paying jobs.

Key point:
Despite that progress, the wealth gap between whites and blacks nearly tripled among study participants, going from $85,000 per family in 1985 to $236,500 in 2009. Overall, the median net worth of whites in the study was $265,000 in 2009, compared with $28,500 for blacks. A broader survey done by federal officials has found even larger disparities, with blacks having a nickel of wealth for every dollar of wealth owned by the median white family.
The study found that black families typically bought homes later in life and in areas that did not appreciate in value as much.

What are some of the solutions to closing the gap?  Housing is still a primary driver of wealth growth, so one key remains making sure all Americans have access to responsible, low-cost financing.

Monday, February 11, 2013

Interesting Program in Nebraska

A lot of the public policy focus around financial literacy looks at ways to teach money skills in the classroom.  An interesting program from the State Treasurer in Nebraska is offering scholarships to students who compete in a financial literacy challenge.  Nebraska recently included personal finance in its curriculum.  This contest is a way to build and reinforce what is happening in the classroom.

Take a look:
Team members who get first place in the state competition will each get a $2,000 contribution to a college savings plan. Second-prize winners each will get a $1,000 contribution, and third-place winners will get a $500 contribution. Stenberg commended the Nebraska Department of Education's inclusion of personal finances in its recently revised social studies standards, and he said the importance of financial literacy can be seen in the failed mortgage loans that preceded the recession and in rising credit card debt and student loan defaults.

Tuesday, February 5, 2013

Surprise! Americans have low life insurance IQ

This blog has dedicated a series of posts to examining markets that are underserved by financial professionals.  Often, the focus of posts is the cause, or why markets are underserved - - such as burdensome regulation.  This post - with an assist from new research by LIMRA - - looks at the affect.

What happens when the middle-market is underserved by professionals such as life insurance agents?  Surprise!  Americans don't understand it and don't use it.

According to LIMRA:
LIMRA provided a life insurance IQ test to 4,000 Americans in order to gauge their knowledge and comprehension of life insurance and it found that less than a third passed the 10 question exam with 55 percent getting fewer than five questions correct. Less than one percent of those surveyed answered all 10 questions correctly.
When only 1/3rd of Americans can pass a quiz about the importance of life insurance, is it any wonder that usage of the product is at an all-time low?

Certainly every stakeholder has a role to play in tackling this problem.  Companies must make an effort to reach underserved markets, while state regulators must make sure the profession is open and accessible to all who are qualified to work.