On Headwinds and Tailwinds

Understanding the Racial Wealth Gap


I used to fly from Michigan to Seattle a lot. All my family was in Michigan, and I lived clear across the country. In the westbound flight (from Michigan to Seattle), we would land on time—or a few minutes late. But on the eastbound flight (Seattle to Michigan), sometimes we’d land a half-hour early (or more).

Pilots are well familiar with jet streams and air currents: these unseen forces that can propel a 300-ton hulking airplane through the sky just like a raging river would carry a log downstream. That’s what was happening: the eastbound flight was being propelled along by an atmospheric river current and we got in faster than when we traveled in the other direction, when we were going “upstream.”  

These past few weeks have been a deep reckoning in the United States begging us to take a harder look at these jetstream-like currents that exist, often unseen and sometimes manufactured, in the layers of our society. 

There’s one that hits close to home for a budgeting company in the personal finance space: the jetstreams and air currents of building wealth. Boosting some further ahead and pushing against the possibility of progress for others.

The Racial Wealth Gap as a Number

Consider this: for every $100 of wealth that an American White family has, can you guess how much a Black family has?

Take a guess.

Did you guess $80? 

A more conservative $60?

How about this: if a White family has $100 of wealth, a Black family has $10

Ten dollars.

Were you way off? Yeah, I was too. Hardly anyone gets this answer right: most people guess somewhere in the $80 range.

Why Does the Wealth Gap Exist?

Where does this disparity come from?

Just like the air currents that propel airplanes to go faster in one direction and slower in another, there are visible and invisible forces that make some people accumulate wealth faster. For others, it seems like they’re swimming against the current to make financial progress.

The Wealth Gap Explained

I hopped on a call with Zaid Gayle, the decorated Executive Director of Peace4Kids (and also the husband of Tamika, one of our wonderful YNAB support specialists). Peace4Kids is a non-profit organization that works as an ally and advocate for youth in foster care who are transitioning to adulthood. He sees these powerful and painful forces as an everyday reality in the community he serves. His organization helps to equip foster kids with strength and a safety net to push through despite this uphill, upwind struggle. 

As you can imagine, it’s not easy work. “There are structural things around wealth and growth that make it harder to build generational wealth,” Zaid says. 

It’s no singular thing, but a complicated and interwoven system of currents that slow down wealth creation for Black communities. In the simplest terms, wealth begets wealth, and poverty begets poverty. When you have assets, it’s easier to generate money from those assets. But when you have nothing, it’s a lot harder to generate wealth from nothing.

For those on firm financial footings, it’s easy to credit hard work and a bit of luck—and while that’s true, many that come from generational stability might overlook or downplay the power of a safety net.

 “Many people have no conceptual idea of what it’s like to start at zero,” Zaid says. 

So let’s look at some of these factors that come into play: the tailwinds ushering some forward and the headwinds pushing others back when it comes to wealth accumulation.

Many people have no conceptual idea of what it’s like to start at zero.

-Zaid Gayle, Executive Director at Peace4Kids

Before we dive in, consider this: when we talk about assets, we’re talking about the resources (both financial and emotional, tangible and intangible) that have the ability to increase your cash flow, reduce your expenses, and provide you with a future benefit.

Asset #1: Homes

Houses are often the stars of the show for the American dream, and many families have their wealth concentrated in this singular physical asset. 


Tailwind: You buy a house, maybe you get help with a down payment. Its value appreciates, you sell it for a profit, and buy a bigger house with the proceeds. 

Headwind: Maybe you can’t afford a down payment so you rent for most of your life. Or maybe you bought a house but it was in a depreciating area (because it was more affordable), and the lender charged you a higher interest rate because it was a higher risk loan. On top of that, if you couldn’t afford the full down payment you will pay private mortgage insurance (PMI) every month. These factors all combine to slow down building wealth through your house.

“For the Black community, if you have a house, it might be in a depreciating area.” Zaid says. “There are things that have happened in terms of housing policy that promote this.” 

Read more about redlining here.

Asset #2: Education 

The quality of your education often dominoes into your adult earning potential—your weekly, monthly, and yearly wage. You’ve heard this before: education is a powerful force to lift people into a better life. We’re not disagreeing, but this path looks different depending on what neighborhood you live in.

Tailwind: You were born into a nice neighborhood, so you went to a good school, with a good library, well-paid teachers, you got a high school diploma, a college degree, and the dominoes fell from there. 

Headwind: You were born into a not-as-nice neighborhood, you went to a sub-par school, you got a sub-par education, which makes you less likely to go to college, which means you have a lower paying job and less money coming in.

“The way the education system is built, a large portion of the funding comes from property tax revenue. The revenue for property taxes comes from the value of houses.” Zaid says. 

Remember from Asset #1? Depreciating neighborhoods have far less revenue from property taxes to go into funding the schools in their areas.

“And the wealth gap continues to increase,” Zaid says.

Asset #3: Families

Families are the ultimate support to lean on when times are hard, and they’re a safety net when life’s problems arise. An intact safety net lets you take risks, it lets you jump into opportunities, and it swoops you up when you stumble.

Tailwind: You are part of a mostly intact family. This might mean your mom can loan you $300 when you get a flat tire, or you have a free place to stay when your apartment has a mold problem, you get a car in high school so you could drive to work (even if your car was a clunker).

You could jump for that job opportunity across the country when it came up, you could take a gap year, try a business venture, because you knew in the back of your mind—in a pinch they’ll be there to catch you. Sure, you weren’t reckless—but you also weren’t completely risk-averse. 

Headwind: your family is not intact. A disproportionate percentage of the Black community is incarcerated, which means parents simply aren’t there. Or, a parent might have to work two or three jobs to make ends meet, and there’s hardly enough money to stretch to the next paycheck. You have no safety net. You can’t take the risks of someone with a safety net. 

Asset #4: Social Capital

Think about the people in your network: if you were looking for a job, this is often the first place you turn. 

Tailwind: Your social network is well connected, you get an internship, a job opportunity, or job shadow from a friend or a friend of a friend.

Headwind: Your social network is less connected. You might not know anyone working in the job you want to pursue, you don’t have any company connections to float your resume to the top of the pile, and your chances are left to the strength of a piece of paper and the attention of a random person in HR.

Hear how randomized trials show Black-sounding names are more likely to be judged more harshly in this podcast episode on the Black Tax from Journey to Launch.

Asset #5: Inherited Wealth

This is often pointed to as the primary driver for the racial wealth gap (and all the categories above are simply dominoes that roll into this). A White family is twice as likely to receive an inheritance as a Black family, and the amount of that inheritance is three times as much as an inheritance for a Black family.

Tailwind: A relative passes away and you receive an inheritance. Maybe it was enough to pay off a credit card, maybe it was enough for a down payment, maybe it paid for the college education of your kids—maybe you don’t have to worry about money ever again. Whatever it was, it was a gust of forward momentum and could very likely have been a transformative amount of money for the trajectory of your life.

Headwind: A relative passes away and you receive a small inheritance. Maybe you bought groceries for the month, maybe you bought a used car. Or maybe you received no inheritance at all. It wasn’t a “transformative” amount and has little to no bearing to change your current financial state.

“If you look at the rule of 72—how many years it will take to double your investment (divide 72 by the rate of return), well, look at inheritance. It builds up over years. It earns and grows over time.” Zaid says. “But for [many in the Black community], there’s nothing to invest. Everything is about survival. Where is the opportunity to build on that?”

And it’s not just the financial compound interest, it’s also the emotional compound interest, the investments you make into a person’s core, confidence, and beliefs about themselves that compound over time: for worse or for better.

He then told me the story of a young woman who went through his organization.

Angelica’s Story

“When I first met Angelica, she was twelve and the social worker told me I had to be careful…that Angelica was a liar. I said, ‘Let me meet her first. Can I get a chance to meet her?’”

“She would make up these phenomenal stories. She had so much pain and was masking her sadness so she didn’t have to relive her traumatic past. She was a survivor of domestic violence. This experience led to her mother being killed and she and her sisters being placed in foster care.”

Zaid’s organization encouraged her to create things with her pain, to rewrite her story the way she wanted. She started writing poetry. 

“She was horrible at first. But she wrote every day for hours at a time. She stayed at it,” Zaid said. “It’s a bit like managing wealth, you just don’t know what you don’t know.”

She became a phenomenal writer (see her perform this piece about her childhood domestic violence experience).

She ended up going to college and earning her Bachelor’s degree in accounting, but she wanted to be an attorney.

So Zaid introduced her to a group of Black attorneys. Hearing about what it required to be an attorney gave her pause on pursuing that career. There’s that social capital at work—the instant feedback that helps shape your path.

On the way back from meeting with the attorneys, Angelica explained that she only wanted to become an attorney because it represented stability—it was a financial safety net. In truth, she wanted to become a writer but was concerned that she couldn’t earn a living.

Zaid believed in her talent and introduced her to writer, director, and actor Jordana Spiro, a Peace4Kids volunteer. The two co-penned a script called Night Comes On, which got accepted into Sundance (Again—that social capital at work).

Angelica’s career path shot upward after Sundance, a fellowship grant, and then she created an incredibly engaged Instagram community of over 19 million followers with @theshaderoom.

Over the last eight years, Angelica has built a wildly successful content platform. She’s sent some of this money back to her community—she’s now the largest individual donor to Peace4Kids.

“She’s created this vehicle for generating wealth through creating her own wealth and turning that over.” Zaid says. “That begins to create an opportunity for this compound interest to grow.”

For an organization like Zaid’s, they are one force of many that help block these headwinds to allow people like Angelica to keep moving upward.

“When you meet trail blazers, your job as an ally is to cut down the weeds so they can see the horizon. When the path is made, then you go behind them to pick up the rest of the mess. The ones that follow don’t see carnage,” Zaid says. “They see a beautiful trail to follow.”

“You need a social framework of people to lean on,” Zaid says. “When things get hard, I tell [the youths we work with]—you can call your mentor, you can call your friend, you can call me.”

The power of a safety net can’t be underestimated.

When it comes to closing the wealth gap, there’s no easy answer. Zaid has this to say:

“It’s not a simple question. There are policy things, and it’s about looking at the spaces around you and questioning the opportunities you give for the people that traditionally don’t have those opportunities,” Zaid says. “Ask yourself: what is the investment that you want your dollars to make? Invest in things that will have the outcome you want to see.”

Learn more about YNAB’s program offering free subscriptions to marginalized communities through YNAB for Good and learn more about Zaid’s work as an ally with youth in foster care through Peace4Kids.