Smart Money Podcast: ‘The Color of Wealth’: Investing for Your Family’s Future

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode is dedicated to a conversation about strategies Black women can use to invest for their family’s future.

Check out this episode on any of these platforms:

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• Spotify

Our take

Black moms may face barriers when it comes to building wealth for their families, but it’s still an attainable goal. One possible way is by using investing as a vehicle. Some moms aren’t in the financial position to invest for their retirement and put money away for their kids simultaneously. In this case, it can be a helpful strategy for parents to prioritize their retirement savings until they’re in a financial position to contribute for their kids, too.

Some strategies for prioritizing your retirement include saving money in a 401(k) plan, especially if your employer offers a match. An individual retirement account is another tax-saving place to stash money.

When it comes to saving for your kids’ future education needs, 529 college savings accounts can be a tax-efficient method. In 2024, if parents meet certain requirements, they can roll unused 529 funds into a Roth account as a result of the Secure Act 2.0. Even if parents don’t have much to contribute, they can start with small, regular contributions.

While Black moms may be at a disadvantage when it comes to building wealth, they can start from where they are. Having an investment strategy, prioritizing retirement savings and being consistent in their wealth-building efforts are steps to consider. Finally, an intangible gift Black moms can give their kids is financial education, which they can apply to their lives as they grow.

More about investing on NerdWallet:

Get Kids Set to Invest With Custodial Accounts

529 Plan vs. Roth IRA? Which Is Best for College Savings?

A Scarcity Mindset Can Cost You Mentally and Financially

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

Sean Pyles: Welcome to the NerdWallet Smart Money podcast, where we typically answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm Sean Pyles. This episode, we are continuing our series called "The Color of Wealth." Our personal finance Nerd Elizabeth Ayoola talks with money experts about how Black women can build wealth, including the challenges they face and how to balance motherhood and money goals. Welcome back to Smart Money, Elizabeth.

Elizabeth Ayoola: Thank you for the warm welcome, Sean. I'm happy to be here.

Sean Pyles: Who are you talking with this episode?

Elizabeth Ayoola: Well, today I am speaking with Bola Sokunbi, who happens to be the founder and CEO of Clever Girl Finance, which is a financial education platform that provides women with financial guidance that will hopefully steer them towards financial independence. Bola also happens to be a certified financial education instructor and a four times bestselling author of the "Clever Girl Finance" book series and "Choosing to Prosper." Today, Bola and I are going to explore strategies that Black moms can use when it comes to building wealth for themselves or for their kids as well.

Sean Pyles: Great. I also want to mention that Bola was on the very first episode of our Nerdy Book Club series. If folks have not checked that out, we'll have a link to it in this episode's show notes post. You can find that at nerdwallet.com/podcast. Also, I wanted to give our listeners a heads-up that for this interview, Bola talked with us from her office, so you'll hear some background noise during the conversation. With that, Elizabeth, I'll let you and Bola take things from here.

Elizabeth Ayoola: Fantastic. I have to start by asking, Bola, how are you?

Bola Sokunbi: I'm doing great, and thank you so much for having me. I'm excited to be back on the podcast.

Elizabeth Ayoola: Yes, really happy to have you. I love the topic we're going to discuss today. I think your story is really inspirational, especially your ability to save $100,000 in just three years on $54,000 income. Can you tell us more about how and when you started saving for retirement?

Bola Sokunbi: Yeah. The example you just shared was something that I accomplished when I had just graduated from college, so several years ago. One of the things that aided me to being able to save that $100,000 in three years was contributing to retirement plans, specifically my employer's retirement plan. Once I first got hired, we were told about the 401(k) plan, and I was like, "Why would I give my money to my employer?" Then a few days later, we had an HR overview, and they said, "You know what? We're going to give you free money." I was like, "Wait a minute. Free money? I'll take the free money." That was definitely a catalyst and the beginning stages of me saving for retirement. I started by leveraging my employer's 401(k) account as I started to learn about how investing worked, and I took advantage of their free match. Then I eventually opened my own IRA account in addition, and that was basically the beginning points of me saving for retirement.

Elizabeth Ayoola: That's fantastic. I'm so glad you were able to start so early. I started investing, I think, at 31. I'm a late bloomer, but never too late.

Bola Sokunbi: Never too late.

Elizabeth Ayoola: No, it's not. I see that you have twins, which means you have double the love in your home. Once you had kids, can you talk about how your saving strategy may have changed a little?

Bola Sokunbi: Fast forward several years later, I'm now a mom of twin babies, and as all the moms who might be listening are aware, babies, children are expensive.

Elizabeth Ayoola: Mm-hmm.

Bola Sokunbi: In addition to having twins, I was also starting a new business and quitting my job, my full-time job, to run a full-time business while having small kids. What I did to accommodate my kids was really to just budget and plan accordingly. I knew I wanted to continue saving for retirement. Even though I no longer had access to a 401(k), I did set up at the time a solo 401(k) for myself as a business owner, and I was able to still set up an IRA. I also wanted to be able to save for my kids in terms of having 529s, and so I just built saving percentages of what I earned into my budget knowing that I had an inconsistent income. Saving on a percentage basis allowed me to keep saving even though my income was fluctuating, as opposed to just sticking to a fixed amount. That's what helped me navigate that change.

Elizabeth Ayoola: That's really clever, especially for self-employed people, because when you don't know if you're going to get income every month, sometimes it can be hard to strategize how you're going to save consistently. I like the idea of doing percentage-based savings.

Bola Sokunbi: Yeah, and I used to feel guilty that I couldn't save at the pace I was saving when I was employed full time, and I would feel bad that I wouldn't meet that dollar amount. "Wait a minute, I'm not earning the same amount in this initial early stage of my business" — so shifting to that percentage-based helped me keep saving but also eliminate the guilt because I wasn't stuck on a number.

Elizabeth Ayoola: Yes, I love that, and I needed that advice. I actually want to circle back a little bit to the feelings that you said of feeling guilty, first of all, that you felt like you weren't putting away enough. How did you deal with that now that you also had to share your income with your kids? Or did you start saving for them maybe when your business picked up a little bit or as soon as they were born?

Bola Sokunbi: One of my savings philosophies is a little plus a little plus a little equals a lot. When my kids were born, I immediately opened their 529 savings accounts, and I continue to save for retirement. Even though my income was fluctuating and I may not have been saving as much, I still saved something. For me, it's more about maintaining, building and maintaining that habit of consistency so that when I'm making a lot of money, it's just second nature to save. Navigating that guilt, I really had to pause and say, "OK, what are my objectives here?" If I feel guilty about not saving enough, does that mean I should stop saving entirely, because then I'm going to feel worse. Instead of feeling guilty for not meeting the $1,000 or $2,000 a month savings goal, let's just say, OK, you're going to save 10% of your income, 5% of your income, whatever that percentage is going to be. That helped me to minimize that guilt. Each time I had money come in, money just went to savings as a percentage base.

Elizabeth Ayoola: Got you. As I mentioned earlier, I know I personally was already a mom when I started saving for retirement. I have a 5-year-old son, and at the time I just didn't feel like I was earning enough to save for both me and him. I was like, "Well, I'll just start saving for myself and save for him later." What's your philosophy for moms who maybe aren't earning a lot of money and feel like, "Oh, I can't really afford to save money from me and my child at the same time"?

Bola Sokunbi: Well, I will definitely say prioritize yourself first, simply because your child has more time than you. You are much closer to retirement than your child is. In a way, they're kind of able to figure themselves out the same way you are figuring yourself out. Prioritize yourself first, but I would say, still open the accounts for your child because when you open the account, you essentially set the intention. Grandma, grandpa, auntie, uncle gives them a gift, you can just put that money directly into their account until you get to the point where you can start to save consistently for them. But I would definitely say prioritize your own retirement savings first, even your general savings and debt payoff goals first, simply because your child has more time. As a baby, they have a full 18 years before they even start thinking about credit cards, maybe even getting a car, et cetera. You want to try to create the plan for yourself first and then add on for your child afterwards.

Elizabeth Ayoola: Then, is there maybe a number goal or a point where you can say, "OK, I think I'm on track or I've saved enough, and now I can afford to put money away for my child"?

Bola Sokunbi: That's a really good question. What is the right number to save? Ultimately, it depends on you. I know in the media, the typical ballpark or number you hear being said is a million dollars, save a million dollars. But what does that mean for you? The way you bring this into perspective is that you think about the average length of time for retirement. Let's say you retire age 65, so this is a standard retirement age. Retirement lasts on average 20 to 25 years. Want to put it on the long life side, you can say 30 years. Over the course of those 30 years, what is it going to cost you to live? Then you think back, "OK, what city do I plan to retire in? Is this an expensive city? Will I have paid off my mortgage? Will I have paid off my car? How much do I need a year to retire?"

If you say you decide you need $50,000 a year, multiply that by 30, and that helps you come up with an idea, or even multiply it by 10 or 15, keeping in mind that most retirees don't retire and sit down on their couch watching TV. A lot of retirees take on second careers, passion projects, other ways to earn income unless they have a health situation. Do some calculations and come up with your number. It might be $500,000, it might be $600,000, might be $1.5 million, but that's how you get a gauge of how much you need to save for yourself. However, you may decide that, you know what, I'm going to semi-retire and continue work. Again, your number will change.

From your child's perspective, a lot of people are saving for their children really to support them through college. There is a fixed amount of money you're looking to save. You're not trying to save to support your child through their own retirement. They're going to do that for themselves. OK, you might decide, "OK, I'm going to help my child pay for college." Again, you're doing a favor for your child. My mom always told me, "I helped you pay for college. It was not your right; it was because I chose to. I chose to help you."

Elizabeth Ayoola: Right.

Bola Sokunbi: You're choosing to help your child. Maybe you decide, "OK, I'm going to help them pay for community college tuition or in-state college tuition." Then you just look at average college rates and say, "If average college tuition for four years at a community college is, I'm going to guess a number, I don't know for sure, is $50,000, I'm going to save $50,000 for my child, or I'm going to save 50%, $25,000 for my child." Then that's a finite number you have. If your child is just born, you have 18 years, 17, 18 years to save. If your child is 5 years old, you have 13 years to save.

Or you might decide, "You know what? I'm just going to save to cover the cost of room and board and books for my child, and then they can try to figure out tuition with scholarships, financial aid, et cetera." You really want to sit down and write down a plan. "This is the plan for myself. This is when I'm hoping to retire; this is where I'm hoping to live. This is my plan for my child. This is what I want to cover to help them go to college." Keeping in mind that all of this is a work in progress. You can adjust as things change, as you earn more, as finances change, et cetera.

Elizabeth Ayoola: I love what you said about saving for your kids being a favor, if that's what you want to call it. But yeah, no, I'm Nigerian as well, and this is something my mom would definitely say. But I love how you say that because especially in this era where everyone is talking about building generational wealth and things like that, and there's also a lot of chatter on social media about not leaving your kids with debt, or rather than not having debt after they go to school. I can imagine a lot of people might feel pressured, like, "I don't want to leave my child with debt, so I have to pay their whole way through college." I like that you mentioned that you don't have to do that and your kids can figure it out on their own.

Bola Sokunbi: Yeah, so I certainly agree with what you said about the talk around people not wanting to leave their children with debt. But one thing to keep in mind, especially when it comes to Black people, women of color, is that it's almost like this is the generation where we've really found our footing financially. We're starting well late in the game compared to our Caucasian, our white counterparts in terms of transitioning generational wealth. For many of us, we are the ones first in our family to transition generational wealth to our children. We are learning financial literacy, we're recovering from inherited debt, we are figuring out how to earn more. We're starting businesses, we're getting degrees, we're doing all these things that will allow us to set this foundation for our children.

Most of us are not coming from trust fund backgrounds or inheritance backgrounds or somebody left me a house. Most of us do not have that. It's kind of like this dynamic of, yes, I don't want to leave my child with debt, but at the same time, I need to prepare myself well financially and then focus on helping them prepare financially without jeopardizing my future self. You need to be able to pay for your retirement before you pay for your child's college. Otherwise, where are you going to live when your child's in college? You can't be on the street.

Elizabeth Ayoola: Fact, you can't move into the dorm.

Bola Sokunbi: Yes. The other thing to keep in mind is that even if you're not financially able to save money for your child because you're living paycheck to paycheck right now, you're trying to keep up with your bills, you're trying to figure out how to start saving for retirement, the one thing that you can give them, one of the most important aspects of transitioning generational wealth is transitioning financial knowledge. Because once you give that child a skill, even if you don't give them any money, once they get their own money, they know exactly what to do with it to build their own solid foundations.

Elizabeth Ayoola: Yes, I love that. Factual, factual, factual. Can you tell me more about your strategy for saving for your kids? What are your thoughts on 529 accounts? Are you saving in brokerage accounts? Do you believe in doing a bit of both?

Bola Sokunbi: The 529 is a specific college savings account for children. I chose to save a college savings account for each of my twins in the event that they do go to college specifically for the tax benefits. There's a lot of benefits depending on the college plan that you select, and they vary. I live in New Jersey, but I selected the college plan at the time in New Hampshire because I really liked the options that they offered. If you're interested in doing college savings for your child, you really want to go through all the different plans offered in different states. Many states will allow people who don't live there to enroll in their plans.

The other thing that I do is that, in the event that my kids choose not to go to college, we may get a tax hit on their college savings plans, but I'm not putting all the money I'm saving for them into that one bucket. I'm also investing for them outside of the 529 in just a regular brokerage account. They each have individual brokerage accounts, and in addition, I'm leveraging those brokerage accounts, teaching them how to invest. My son is at the age when he really loves sneakers. He loves Nike; he loves Adidas. I teach him that, "Well, you can buy the sneakers, but you can also be a co-owner of the company. When Grandma gives you money for Christmas to buy a new pair of sneakers, you can save half of it towards your next pair and then invest half of it as the owner of this company. Because you like their shoes and you're paying attention to their products, you are invested in what they're doing, well or not, as you invest your money in them." I have brokerage accounts for them.

I'm also teaching them to save in piggy banks at home. They have individual piggy banks at home where they put in cash, they get little money here and there from aunts, uncles, Mom and Dad for different reasons. Then teaching them how to save, how to give, how to budget. Three different categories of saving for my children. Again, we want to equip our children to be able to help them go to college the same way my mom helped me go to college, and at the same time, teaching them financial values, teaching them financial lessons and helping them understand the value of a dollar, because I'm not going to save all this money and hand it to you and then you go and blow it because you don't know how money works. It's my responsibility that, if I'm going to save this money for you in a 529, I'm going to teach you how to invest. I'm also going to teach you why this is important.

Elizabeth Ayoola: Yes, I'm here for all of that. Speaking of the 529 account, I don't know if you saw the recent changes that were set forth by the Secure Act 2.0 that affect 529 accounts. Well, it takes place in 2024, but now people can roll over any unused funds into Roth IRAs. I know I for myself was apprehensive about saving in a 529 account because, like you said, what if my child decides not to go to college and I've overfunded the account? What happens to the funds and I don't have any other kids to give the money to? Anyway, I was happy to hear that now you can roll the money over into a Roth, so that worry is gone. What are your thoughts on this for maybe parents who are like, "I don't want to save into a 529 account because what if my kid doesn't go to college?"

Bola Sokunbi: I love the idea of the Secure Act. I think it's a great opportunity for you to be able to roll over the money into a child's retirement savings IRA account. One of the things I do plan to do is, when my kids get to the right age, I think the qualifying age, I will help them open up either their traditional or Roth IRA account. That's great. But for me, the way I look at saving in a 529 is money that I'm putting aside. Whether there's a tax benefit to it or not, this is money that's being saved over the long term, investing that's growing and taking advantage of compounding dividends and appreciation.

For me, if I have overfunded the account in 10 years, 15 years, when they get to that point, even if I have to take a tax hit, pay income tax on the money for taking out the money because this child doesn't need this much money to go to college, it's still money I have put aside. It's better than zero. Now that the Secure Act has been put in place, that's a great incentive to save. But one thing I will say is do not use whether or not you're going to pay taxes on an account as a reason not to save. Because at the end of the day right now, because I'm not taking the money out of the account, there's no tax penalty. There's no tax situation involved. The money is just growing, and the gains that I hope to make on this account can far outweigh any tax penalty, any tax hit in the future. Why not save?

Elizabeth Ayoola: Yes. You made a stellar point earlier, which is that sharing financial knowledge is probably one of the best things that you can equip your child with. You did mention some ways that you are teaching your kids about money, which I love. Do you have any other strategies you're using and any other tips for Black moms in terms of how they can do the same and teach their kids about money?

Bola Sokunbi: I would say involve your kids in the whole process. I mentioned we are starting much later in the game than our counterparts, but sometimes moms, Black moms are like, "Well, I have no savings. I'm trying to figure out how to pay debt. I'm trying to figure out how to pay bills. What can I teach my kids?" You can teach your kids about paying bills on time. You can teach your kids what a debt repayment strategy is so they understand that you have money coming in, but you also have money going out to pay bills, to pay down debt because you're trying to achieve this goal of debt freedom, which is an incredible goal to pursue. You can involve your children in that. It gives them perspective of how you're managing your income. It gives them perspective of your responsibility as an individual and how you are approaching your finances and how you want to do better. These are all great lessons for our children to learn.

You can involve your children in grocery shopping planning, grocery shopping budgeting, meal planning in your home so they understand, "OK, we have $100, but that's all we have to spend at the grocery store. How many things can we pick up under $100 to meet this meal plan goal that we have for the week or the next two weeks?" There's many different ways that you can involve your kids. There's no shame in actively being on the path to pay down debt or starting your savings over. These are all great things to do that ultimately are going to get you to your big goal. Involve your children in that. Let them understand aspects of real life because at the end of the day, they are going to grow up. Either you improve them now or they learn the hard way later.

Elizabeth Ayoola: Yep, yep.

Bola Sokunbi: Just involve your kids.

Elizabeth Ayoola: Absolutely, I'm with you on that. I definitely learned the hard way.

Bola Sokunbi: One thing I'm very particular about, especially as a Black woman, is I want to perpetuate a positive mindset with my children. I always encourage this in all Black mothers, especially given the history and where we are coming from, especially when you think about just a lot of things to think about in the past around our race. I always encourage moms to be mindful of how they speak to their children in terms of what you can and cannot afford.

You don't want to give your children a lack mentality where they always hear, "I can never afford this. This is why we are broke. Don't nobody got money for that." Instead, "We cannot buy this because we're paying down this debt so that we can achieve debt freedom," or, "we cannot buy this because we're saving for this goal so that we can buy our first house, so that we can go on vacation." Think of the positive spin, even though you're going through a difficult situation so your kids can observe that. They can start to build that abundance mentality, that gratitude mentality, even if you're going through a difficult time right now.

Elizabeth Ayoola: Oh, I love that so much. At NerdWallet, we've done a few articles about financial therapists and money mindsets, and I definitely think the way that you talk about money can influence the kind of values that your kids have around money and their relationship with money in the long term. That's a really, really good tip. All right, so my next question for you is about Clever Girl Finance community. I'm sure within your community you have many Black moms, or I assume so. Are there any barriers that you notice that keep these moms from beginning their investing journeys?

Bola Sokunbi: I think one of the biggest barriers is just fear. Fear of the unknown, fear of what they have been told, fear of making other people's mistakes. What I always encourage women to do and to understand is that knowledge is power and knowledge minimizes fear. Yes, investing is taking risk, because there's no guarantees. But there's a difference between taking risks and taking calculated risks. Calculated risks are based on information. They're based on historical data, they're based on facts, they're based on research. This is all information you can use to make sound decisions, to take calculated risks, than just investing because someone on social media said Tesla is hot.

Elizabeth Ayoola: I've been there.

Bola Sokunbi: Empower yourself, educate yourself, minimize the fear and take calculated risks, which means do your research. If you are unsure, if you're uncomfortable about something, speak to a financial professional. So many great books, so many great tools and resources. The Clever Finance platform is completely free; we have tons of those resources as well. There is no lack of information in today's world to help you succeed. You just want to make sure that you are mindful of where you're getting your information from because there are also a lot of scams out there, especially on social media.

Elizabeth Ayoola: Guys, please don't get your financial information solely from social media. My last question is, with the current economy, we know there's inflation and cost of living is up. How might saving and building wealth become more challenging for Black women?

Bola Sokunbi: Yeah, so building wealth and saving money in a difficult economy can be challenging simply because our incomes are not increasing as the rate of inflation. Gas is going up, prices are going up, everything is going up. But your boss or your employer is not just handing out raises. They're also tightening their belt straps, and if anything, people are worried about job security. However, it is still possible to thrive during difficult economies. This is a time where you likely have to step out of your comfort zone in your career, in your business, with your finances.

Think about ways you can cut back; think about ways you can earn more. There's no shame in doing what you need to do to put food on the table. But being mindful and at the same time being creative. A lot of people are afraid to invest right now because they're seeing the stock market is down, investments are down. But if you look at it in a different light, this is actually a great opportunity with research and calculated intention to invest. It's a great time to invest because it's almost like the stock market is at a bargain or on sale, as Warren Buffett would say. Keep your eyes open for opportunities.

One big mistake people make during difficult economic situations is that they get into this woe is me situation and start having this woe is me pity party with all these other people, where it's like everything is too expensive. We sit around, we complain, complain, complain. Everything's expensive, expensive, expensive. We kind of lose focus, and we get distracted from seeking out those opportunities. Because if I have a spare hour in the evening before I have to take care of my kids or you have to get ready for work the next day, if I spend that hour on the phone with a friend complaining about how expensive eggs are, I have one less hour to do research on investments, to do research on the best places to save my money, on how to start a business. Be mindful of how you're spending your energy when things are going wrong because there's lots of people that will complain and join your pity party with you.

Elizabeth Ayoola: That is good advice. Thank you so much, Bola. This was such an engaging conversation. Do you have anything else you'd like to add?

Bola Sokunbi: No, I just want to, especially for women, Black women, women of color, just encourage all of us to stay focused and continue to pursue and work on our goals. It's easy to give up when there's a lot of different dynamics at play, when a lot of people depend on you and you feel overwhelmed. There's a lot of burdens that Black women carry. But I will say stay encouraged, stay focused and know that you have everything that it takes to be successful. We know; why not you?

Elizabeth Ayoola: That's right. Why not us? Definitely, we can all do it. Thank you so much, Bola. Thank you for sharing your knowledge and for creating such a life-changing platform for women everywhere through Clever Girl Finance.

Bola Sokunbi: Thank you for having me.

Elizabeth Ayoola: I'm hoping more women of color begin their investing journey this year, and I hope this episode helps. For everyone out there to share your thoughts on how to budget, pay off debt or manage finances as a parent, shoot us an email at [email protected].

Here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general education and entertainment purposes, and it may not apply to your specific circumstances.

This episode was produced by Sean Pyles and myself. Liz Weston helped with the editing, and Kaely Monahan mixed our audio. And a big thank-you to the NerdWallet copy desk for all of their help.

With that said, until next time, turn to the Nerds.