Today, families are facing a concerning financial picture: Costs for basic needs like groceries and rent are outpacing earnings in many places, and the traditional markers of upward mobility—homeownership, a four-year college degree, savings for the future—are delayed or moving further out of reach because of increasing costs. Middle-class families especially are feeling this pinch, as these affordability challenges can make building long-term wealth significantly more difficult.

For Black middle-income families, who are less likely to have reserves of wealth or inheritances because of historical barriers and exclusionary policies (PDF), rising costs could jeopardize their financial stability and future class position. Currently, 39 percent of Black middle-income earners struggle to afford necessities where they live. And young Black Americans have disproportionately less wealth to bolster their finances, with white Americans younger than 25 holding 16 times the wealth of their Black peers.

As policymakers look to make life more affordable for all Americans, it is critical that policy solutions oriented toward addressing rising costs also acknowledge and respond to the wealth disparities that Black middle-class families face. Doing so requires pairing short-term relief around the costs of child care, education, and homebuying with long-term strategies to build household wealth that can sustain over generations. Here, we offer policy solutions to ensure all families, including Black families and their children, can reach and remain in the middle class.

How do Black families and their children fit into the middle class?

Though some scholars conceptualize the middle class based on income, education, homeownership, and employment, we take a slightly different approach. The Black Family Thriving Initiative at the Urban Institute was established because we believe that wealth—the full sum of assets a person or family can draw on—or its absence paints a more accurate picture of financial security, especially for Black families.

Today, Black families typically have less than one-sixth the wealth of white families. Antidiscrimination policies and practices have helped some Black households make progress in employment and homeownership. But the shortage of wealth-building policy options, and corresponding absence of significant wealth, means their foothold in the middle class is tenuous.

Data already suggest that Black children are less likely to be upwardly mobile than white children and that Black middle class families are more likely to experience downward mobility than white families. Downward mobility and financial stress not only affect a family’s finances but can also increase stress for adults and negatively affect children’s well-being and behavior, meaning a strong financial safety net can help guard against negative economic and long-term well-being outcomes for children and young people.

Policies that invest in children and help their parents with affordability in the short and long terms are key to helping families achieve financial security and be well positioned for upward mobility and wealth building.

Making early child care more affordable

The persistently high costs of child care in the United States shape the day-to-day financial realities of families nationwide, with child care costs exceeding those of median rent or college tuition in some cases. The average annual cost of child care for two young children nationally is $29,100, which amounts to roughly 52 percent of the median income for a typical Black household.

If high costs exceed household wages, some parents, but especially women, are forced to reduce their work hours, turn down advancement opportunities, or leave the workforce altogether—with Black women facing the steepest declines. Already, Black children are more likely to attend lower-quality child care settings, and 75 percent of Black children experience low-to-medium-quality child care arrangements. When children cannot access high-quality child care, research shows they may fall behind in their academic, cognitive, social, and emotional development.

To improve the affordability of child care for middle-class families, state and local policymakers can:

• Improve access to and affordability of child care options. Consistent enrollment in high-quality child care shows clear benefits for children, including better academic and social outcomes. By expanding the Child Care and Development Block Grant program to guarantee assistance to low- and middle-income families, policymakers can ensure high-quality programs are affordable and increase mothers’ ability to work and increase families’ long-term earnings.
• Expand the supply of child care. Child care shortages nationwide have made it difficult for some parents to find affordable care. State policymakers can encourage supply by offsetting the costs to start new programs, provide funding to improve workforce compensation and conditions to promote staff retention and financial health of child care businesses (PDF), and invest in the construction of new buildings to serve as child care centers.

Investing in Black children’s future wealth-building ability

For families with lower levels of wealth or no intergenerational wealth to draw on, it can be challenging to comfortably afford opportunities for their children, such as help with college tuition or money toward a down payment for a home.

Though not the only pathway, higher education can help improve young people’s prospects for upward economic mobility. However, as costs rise at many four-year colleges and universities, the strain of student loan debt can diminish economic gains.

Further, not all degrees confer the same economic benefits to all degree holders, as the returns from education—such as future earnings and access to employment benefits—are lower for Black workers. Evidence suggests that even with similar levels of education, quality employment is distributed unevenly by race and gender, with higher-quality roles often being held by white men and lower-quality roles held by Black men and women.

Homeownership offers another pathway to wealth building and is often considered the cornerstone of the middle class. Yet, the costs of homeownership are rising rapidly, with home sale prices up 80 percent nationwide since 2017 while earnings rose just 38 percent over the same period. Without additional support, homeownership is becoming increasingly unaffordable for younger Americans.

To support wealth building among middle-class families and invest in those children’s future, state and local policymakers can:

• Create early life college savings and wealth-building accounts. At the federal level, the Trump administration has introduced 503A accounts, a national effort to endow all kids born between 2025 and 2028 with assets at birth. State and local policymakers can build on this effort by designing their own early life wealth-building accounts based on evidence of what works. With mechanisms for enrolling all children automatically at birth, providing ongoing contributions from a nonfamily source, making larger contributions to children who need them most, and providing participants with financial planning and additional support, early life wealth-building accounts can reduce the racial wealth gap and dramatically decrease the number of Black students taking out loans for higher education.
• Invest in down payment assistance programs. These programs, which provide low- or no-cost down payment assistance to first-time or first-generation homebuyers, are a proven approach to increase homeownership among Black households. They address renters’ concerns about not having enough savings to purchase a home and help reduce the debt new buyers take on. When paired with additional policies aimed at increasing overall housing supply, these programs can address both short- and long-term housing affordability.

Affordability solutions should also invest in wealth building

Black middle-class children face unique financial vulnerabilities because of historical and persisting wealth disparities. Without effective solutions amid the current affordability crisis, the promise of upward mobility will remain out of reach.

Addressing affordability is essential to strengthening the middle class now and ensuring all children have the ability and resources to build wealth for generations to come.