For the 14th time this year, the Bank of England has hiked the base rate of interest in a bid to tackle high inflation. The latest rise in August took the base rate from 5% to 5.25%, the highest it has been since the financial crash in 2008.
While there is no doubt that increasing costs are affecting many people across the UK, Black people and people from other minority ethnic groups continue to be disproportionately affected by these economic changes.
According to research conducted in 2023, 58% of Black and ethnic minority people were forced to lean on financial support (such as credit cards and loans from family and friends) because of the cost-of-living crisis, compared to just 30% of white people. Where Black and minority ethnic people did apply for a loan, over half (54%) were rejected, compared to just 38% of white people.
Further research conducted by the Runnymede Trust revealed that, over the last decade, changes to the tax and social security systems have been highly regressive, with a disproportionate impact on ethnic minority groups. While white families now receive £454 less a year on average in cash benefits than they did a decade ago, this rises to £806 less a year for Black and minority ethnic families and even higher to £1,635 for Black families.
This struggle for financial aid and resilience is having a direct negative effect on the mental health of marginalised communities, with 69% of people from Black and minority ethnic backgrounds reporting that their mental or physical health has been affected by their financial situation, compared to just 47% of white people.
Sabrina Dennis, CEO of multi-award-winning charity, First Class Foundation, specialises in connecting young people and families with their purpose by teaching them how to find and make the most of the opportunities around them.
She says that this experience is nothing new to many people in the Black community but that it doesn’t have to continue that way, commenting: “For a long, long time the Black community has been left behind, left to find its own way through hardship, without being afforded much, if any, of the same access to opportunities or support services as white people. We’ve seen it before and we’re still seeing it now.
“You only need to look at the data to see that even in a cost-of-living crisis, where people are being forced to choose between heating their homes or feeding themselves and their families, marginalised communities are the ones struggling the most. The question remains, how do we change this both now and for years to come?”
Indeed, when looking at the current wealth gap, the disparity between ethnic groups is clear; According to the Runnymede Trust, for every £1 of White British wealth, Black Caribbean households have around 20p, and Black African approximately 10p. This disparity continues into inheritance, where the average person of Black Caribbean ethnicity inherits £778, compared to a staggering £3,068 for the average person of White British ethnicity. Meanwhile, those of Black African ethnicity typically inherit nothing.
Sabrina continued: “While these statistics may make legacy planning seem redundant for those who feel they don’t have much of a legacy to leave, it plays a crucial part in ensuring that the generational wealth gap does not continue at its current rate.”
Here, Sabrina shares six steps on how to build a legacy despite hard times, and how you can best plan to leave it to your loved ones.
Clarify Your Goals
“Nowadays it is easy to look at what everyone has and is doing with their lives and feel that you should have the same by now, or feel that you want the exact same thing. Remember that not everything is meant for you; think about what you want for yourself and your family and build your future around that, not around what you think you should have or want. Being clearer on your goals will also help you make the necessary steps to achieving them.”
Educate Yourself
“Once you’ve decided on your goals (even a goal for the next step in your journey), you need to know how to achieve them and education is key for this. There are so many options out there when it comes to bank accounts, savings accounts, investment opportunities etc., that only you can decide what will work best for your current situation and the situation you want to end up in.
“Doing your own reading and research are great steps but speaking to a financial advisor will help you gain access to a crucial insight and understanding that you might otherwise not have. If you can, go and find an advisor you relate to, otherwise speaking to advisors at the bank is a great first step. Whoever it is, make sure to do your research on their accreditation and reviews.”
Take Action
“You know your goals, you know how to achieve them so now it’s time to take action. It might seem daunting at first, not knowing how it is going to pay off or if it is going to be the right decision, but you have to trust yourself.
“Whether it’s a savings account, an ISA or an investment of some sort, the fact that you’re taking the steps to build your legacy is something to be proud of – even if at first it doesn’t look like much! If it doesn’t go to plan or you’re not sure you made the right decision, you can always do further research into other options as your pot grows.”
Pension
“Building your legacy is easy to do when you’re younger but as you get older – especially to pension age – it can be even more difficult to build extra capital and find new sources of income. This is why it is crucial that you have a pension set up; if you’re employed then you’ll be auto-enrolled but if you have the income to spare, consider boosting your pension with additional payment. If you run your own business then the rules differ somewhat – do your research and decide which option is best for you and your future self.”
Preparation is Key
“As your legacy gets bigger, you need to think more about how you’re going to leave it. Insurance, life insurance, critical illness cover, wills and funeral plans are all things you need to be thinking about. You might think that your legacy will be left to your next of kin if the inevitable happens, but there are caveats to that so it is important to have your wishes noted down and plans in place. Again, do your research into the best option for you and speak to an advisor if you need assistance.”
Have Patience
“Rome wasn’t built in a day and the same can be said for any kind of legacy you’re trying to build. It is a long journey and you might not reap the rewards immediately, but the important thing is to stick with it and stay on the ball. Times change and what worked for you one year, might not be right as your capital grows; try to stay up-to-date on things like rate changes, market prices and new products in the financial market as something may come along that is perfect for you.”
In a bid to practise what they preach, Sabrina and her husband, Nathan, are hosting a Financial Preparation and Legacy Planning Summit this year, in partnership with Pentecostal Credit Union. With the aim to raise awareness around legacy planning and wealth management, and improve social mobility and access to financial resources that wouldn’t usually be available, Nathan and Sabrina will be taking the summit on tour to three cities across the UK; Birmingham (9 September), London (14 October) and Manchester (25 November).
