The Financial Illiteracy Problem Among Small Business Owners

As I have met small business owners over the last two decades, I have realized that financial illiteracy is rampant. Less than 50%  of those I have met can read their profit and loss statement and only 25% can understand their balance sheet.

My guest on The Small Business Radio Show this week says this issue is especially true for minorities. Lisa L. Baker has had a distinguished career in corporate America spanning nearly three decades. She has held management and executive positions for several Fortune 500 companies that include Synchrony, Microsoft, Citigroup, and Bank One.  At Synchrony, Lisa was one of only nine Black female executives among 16,000 employees, holding the position of Senior Vice President and General Manager.

Most recently, she founded a life coaching company, Ascentim, to follow her passion for helping others reach their peak in connections, careers, and finances. This year, Lisa was named a 2022 Brightside Trailblazer in Business by Brightside Global Trade.

Lisa discusses the hardships she experienced in her life. Her parents were poor and uneducated; they were a maid, a gardener and a chauffeur. Their advice was to stay in school to get a good job. Lisa says “I did that but still had to live through bankruptcy even though I was a financial service professional, then divorce, and career setbacks.” She eventually was able to get of all that debt and retire at age 54.

It is rare that parents talk to their children about money. Lisa explains that “financial illiteracy is a problem in general and that’s especially true for minorities. This is compounded by the fact that the earnings gap means minorities start off behind and the gap only widens over time. For example, Black Americans earn 30% less than Whites. The less people make the less they understand how money works. Lower inheritances amounts are also a factor.”

Listen to Lisa talk about the solutions that include policy changes that prevent discrimination and more financial education for everyone at an earlier age.

Listen to the entire interview on The Small Business Radio Show.

Image: Lisa L. Baker

This article, "The Financial Illiteracy Problem Among Small Business Owners" was first published on Small Business Trends