It may come as no surprise the LGBTQ+ community confronts a host of financial challenges our straight friends do not. Often overlooked are the negative effects that financial discrimination impose on building LGBTQ+ generational wealth. The traditional view of a wealthy gay couple with no children (aka a dual-income-with-no-kids or DINK) and oversized spending power is just that – a stereotype.
According to a TD Ameritrade survey, the classic image of the American dream – homeownership, marriage, starting a family, finding secure employment, and building wealth for future generations – may be a distant one for many members of the LGBTQ+ community. The results indicate that only 35% of LGBTQ+ millennials are likely to achieve these goals by the time they turn 40. Contrast this to roughly half of their straight millennial peers. The survey also uncovered that LGBTQ+ households earn about $13,200 less per year than straight households ($66,200 versus $79,400).
There are numerous headwinds that contribute to the LGBTQ+ community being left out of generational wealth. These include family rejection, barriers within the financial system, workplace discrimination, and a dearth of financial literacy. According to a Pew Research Center study, almost half of LGBTQ+ adults say that they have been rejected by a member of their family or a close friend as a result of their sexual orientation or gender identity. As a consequence, scarce familial financial support is a widespread issue within the community.
The compounding effect of these financial barriers are what have contributed to the generational wealth gap faced by the LGBTQ+ community. Without taking intentional steps to break down these barriers, more queer people will continue to be at a disadvantage in securing a stable financial future.
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Enduring Financial Exclusion
It seems in every chapter of life, members of the LGBTQ+ community face financial challenges their straight peers would never imagine navigating. From adolescent years often marked by being kicked out of a childhood home, not receiving financial assistance for higher education from disapproving parents, being completely removed from the family estate plan – the toll for being LGBTQ+ can have massive financial implications.
According to the Federal Reserve, the average inheritance is $76,200 for those coming from a household without a college degree and $92,700 for those from a college educated household. When viewed alongside Cerulli Associates forecasting that upwards of $68 trillion will migrate to younger generations within the next 25 years, LGBTQ+ heirs could stand to miss out on trillions through exclusion from their family’s estate plans.
Putting together the downpayment for a house or apartment can be a herculean task for just about anyone, but without the financial support of one’s family, many would not be able to fund a deposit.
What’s more, a disproportionately high number of young people experiencing homelessness identify as members of the LGBTQ+ community. The Williams Institute reports that between 20% and 45% of homeless youth identify as LGBTQ+. Without access to housing or financial support from family, LGBTQ+ youth can be at a financial disadvantage before even walking across the stage at high school graduation.
According to an Advocate survey, LGBTQ+ students also carry a larger student debt burden than their straight peers, with students identifying as a member of the queer community having on average $16,000 more in student loan debt.
Intersectional Challenges Within the LGBTQ+ Community
While being LGBTQ+ can mean unique money issues, the financial challenges faced by queer people of color and queer women can often be compounded by other systemic inequities.
Outside of the common financial barriers faced by members of the LGBTQ+ community, queer people of color also face a racial wealth gap. Employment discrimination, systematic inequalities, and disparities in financial education all play a role in creating this inequitable financial playing field.
The Federal Reserve notes that the average white family’s wealth is eight times greater than the wealth of an average black family. The gender pay gap also contributes to excluding women from building generational wealth. Data compiled by Pew Research indicates that women earned 84% of what men earned in 2020.
Supporting Future LGBTQ+ Generations
Despite the long-standing barriers facing LGBTQ+ people in gaining access to financial education and financial services, LGBTQ+ personal finance now offers a way for many to improve their financial literacy in more convenient ways than ever before. While investing early and regularly is one of the most effective ways to secure a financially comfortable retirement, it’s never too late to build wealth and support the next generation of LGBTQ+ people.
The LGBTQ+ community deserves access to quality financial advice specifically tailored to their unique needs. Financial planning is unique for every person, couple, and family, and there are several different planning possibilities for those in the LGBTQ+ community. It’s critical to find a financial advisor well-versed in the opportunities and challenges the community faces daily.
Schedule a conversation with an Abacus financial advisor today to discuss building a plan for financial freedom that helps close the wealth gap facing the LGBTQ+ community.