Guest blog: Let’s end the Ethnicity Premium and its impact on financial resilience

Guest article by Jerry During, CEO, Money A+E. This article was first published in the summer edition of Society Matters magazine.

As savings rates fly up as high as 9%, this is the time to shore up our financial resilience – our ability to withstand larger ‘life events’ – with a solid savings buffer

Yet a shocking 60% of people from Diverse Ethnic Communities have no savings to speak of. Why? 

My colleagues and I point to a phenomenon that we are naming the ‘Ethnicity Premium’. The organisation I work for, Money A+E, provides money advice, education and mentoring to Diverse Ethnic Communities, with 80% of our advice clients not identifying as white British. Our experience and research with our partners has identified the Ethnicity Premium: like the Poverty Premium, it is a complex set of barriers to equal economic participation, and additional costs for goods and services, encountered daily by Diverse Ethnic Communities. 

It extends into financial products: people of colour are 4 times more likely to be denied a bank loan than their white peers, for example, and will pay £250 more on average for car insurance. 

And it makes achieving financial resilience a greater challenge. 

Broadening horizons in saving 

At Money A+E, our mission is to transform lives through high quality money advice and education. Our average advice client has £3,788 in debts incurred on essentials like rent and household bills – all of which have risen in the Cost of Living Crisis – and come to us in significant mental distress.

We help our clients to manage those debts, supporting them to be £737,473 better off in total in 2022, while also experiencing 58% average increases in wellbeing. 

And effective financial education can take people from that place where saving seems like a distant possibility, to broadening their horizons. 

As Frederick, our Head of Education, puts it: ‘Financial literacy develops certain habits, it makes you aware. Many of the people that we see don’t know about certain products that could help them. Being able to make those things visible for them is very important.’ 

One sage piece of advice that Fred and his team passes on is that regularly saving small amounts – starting as small as one pence per day if necessary – is the best way to build long-term wealth and healthy habits. 

We know that with the right support, our clients can save hundreds or thousands, taking advantage of those rocketing rates and building their financial resilience through a powerful habit. 

Trust through representation 

We know the barriers involved in this work too. A low level of trust in traditional finance providers among Diverse Ethnic Communities is mirrored in a distrust of traditional money advice providers – unfortunately often linked to discrimination and other negative experiences.

For us, community-led support is the answer. This approach has proved highly effective and saw some amazing results in underprivileged communities in Dagenham last year. 

And in terms of personal finance products, we hear from our communities that diverse representation in the sector and products could help them to connect. 

As my colleague and former Money A+E service user Tanzila puts it, ‘For me and my friends and family, banks could offer choice including Islamic finance options. It would be like going to an event and the food having a Halal option: choice!’ 

The Racial Justice network 

This is why Money A+E and our partners are now working to bring together Black and minoritised Londoners with lived experience of financial exclusion, the building society and banking sectors, regulators and politicians, to address the Ethnicity Premium together. 

Our new Racial Justice network is a strategic partnership and action-focused campaign that aims to improve access to financial products and services; I am thrilled to have already seen huge enthusiasm for this among the sector when I facilitated a session at the Building Societies Conference in May. We will also be working to increase representation through employment within the financial services industry. 

And Fred sums it up. ‘Encouraging and bringing in diverse groups, it does help to close that gap where the banks could just be aware of a group of people: this is where we are, this is the product that we need, the type of support we need.’ 

Find out more:

Contact Jerry During at jerryduring@moneyaande.co.uk if you are interested in learning more or joining the Racial Justice network.

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