This year COVID-19 — and its disproportionate impact on gay, lesbian, bisexual and transgender (LGBT) communities — highlights LGBT financial concerns that are often overlooked. During the best of times, LGBT people, especial transgender and gender nonconforming people, face higher rates of poverty and unemployment than the general population. The pandemic has only widened this gap. In a recent survey, the Human Rights Campaign found that 17% of LGBT people lost their jobs because of COVID-19, compared with 13% of non-LGBT people. The report also found that one-third of LGBT people had their hours reduced because of COVID-19, compared with one-fifth of non-LGBT people surveyed. Pride Month offers us all a chance to think about how financial wellness conversations can be more inclusive of queer experiences. Here are 3 examples of unique barriers LGBT communities face to building long term financial wellness:

1. Saving is both harder and more important for LGBT Americans

While 35% of LGBT adults said they could depend on family and friends for financial support before coming out, only 20% of LGBT adults said they could still depend on family and friends for support afterwards. Living in a way that embraces your gender identity and/or sexuality can often come with financial consequences. For many, this includes sacrificing the kinds of financial support cisgender/heterosexual people usually don’t think about losing, like moving back in with parents or having family help cover college expenses. Because of this, building a healthy emergency fund is key for LGBT people looking to achieve financial security. Saving is also important for achieving long term goals like retirement (LGBT retirees are twice as likely to live in poverty than their non-LGBT peers), as well as other needs like paying for gender affirming medical care. Unfortunately, because of depressed wages and pervasive discrimination, this is easier said than done. Transgender people, for example, are four times more likely to have an annual household income of less than $10,000 when compared to the general public. This means that higher savings goals are often out of reach for LGBT individuals and families, even though having cash on hand is more crucial than it is for those who don’t identify as LGBT.

2.  LGBT Communities Are More Vulnerable to Predatory Financial Products

According to a 2015 survey, 21% of LGBT people are “unbanked,” meaning they don’t have at least one basic bank product like a checking or savings account. This, combined with LGBT consumer’s particular risks for poverty and financial issues, makes them more vulnerable than their non-LGBT peers to predatory products like payday loans, whose interest rates can go as high as 462% in Missouri. It also increases reliance on other expensive, predatory products like check cashing and expensive prepaid cards. Being unbanked isn’t the only reason LGBT consumers are exposed to predatory lending. LGBT borrowers in the U.S. also experience “widespread credit discrimination” when trying to use mainstream financial institutions. LGBT people “frequently report being denied a loan or line of credit on the basis of their sexual orientation, gender identity, or gender expression,” even though they’re qualified. One transgender woman in Seattle even had her bank account frozen because the bank’s phone system recognized her voice as a “man.” This kind of discrimination shuts LGBT people out of financial institutions, further pushing them to predatory products that drain paychecks and trap people in cycles of inescapable debt.

3. Estate planning and advanced directives are crucial for LGBT adults

An estate is simply what you own (assets) minus what you owe (debts). It includes everything from money in checking accounts and life insurance, all the way down to your car and furniture. Estate planning is essential for LGBT couples (especially if they’re unmarried), because your spouse likely can’t receive benefits unless they’re a designated beneficiary. Even if you aren’t in a relationship, planning ahead can make sure someone’s estate goes toward supporting chosen family, instead of relatives they no longer have a relationship with. A similar reasoning applies to advance directives, which empower you to decide ahead of time who will make decisions about your healthcare if you’re unable to do it yourself. Otherwise, these crucial decisions will default to traditional family structures, which often include estranged or out-of-touch family members. Planning your estate and advanced directive isn’t as complicated as it sounds. However, there are barriers like finding and affording LGBT friendly lawyers, since LGBT estate planning and advanced directives can be more complicated than those used by cisgender/heterosexual adults. COVID-19 poses a higher risk to LGBT communities — because of higher instances of pre-existing conditions and medical discrimination – which means estate planning and advanced directives are taking on a new sense of urgency this year.

COVID-19 has forever changed way we approach personal finance in the U.S. Hopefully, that change will include centering the many barriers LGBT communities face to achieving financial security. At the end of the day, addressing the root causes of LGBT financial insecurity will result in a system that improves everyone’s financial wellbeing, because a rising tide lifts all boats.

Prosperity Connection® was established in 2009 with the help of St. Louis Community Credit Union. It is a 501(c)3 whose mission is to promote economic success for everyone in the St. Louis region by providing financial education and access to reliable financial products and services. Read more about Prosperity Connection here.

Rung Co-Designer

Prosperity Connection