For National Hispanic Heritage Month, we're celebrating the contributions of Hispanic and Latinx Americans in the financial space. And we're empowering others in the Hispanic community to pursue avenues of financial independence and security. Let's take a closer look at some of the financial hurdles that Hispanic communities commonly face as well as some strategies for promoting financial empowerment.
For many in the Hispanic community, creating wealth remains a challenge. Highlighting this, the Federal Reserve Bank of St. Louis reports that the median wealth for a typical Hispanic family is $38,000—much lower than the $184,000 median for white families. Obstacles to building wealth include a lack of access to affordable financial products, including credit, as well as high-interest rates.2 Another barrier includes disproportionate student loan debts.3 And non-native English speakers often face unfair lending practices and have limited financing choices.4
These facts underscore the need to promote financial empowerment in the Hispanic community, which can help break down barriers to economic progress.
What Financial Barriers Do Hispanic Communities Face?
Financial barriers that hinder the economic empowerment of Hispanic communities include language barriers, cultural differences and attitudes toward money. These factors can impact financial decision-making. Additionally, there may be a lack of trust in financial institutions stemming from historical experiences.5 Addressing these hurdles is crucial for promoting economic prosperity within the Hispanic community.
Language barriers
According to the Federal Reserve, about 5.9 million households in the U.S. were without a bank account in 2021. Among these, the number of unbanked households was notably higher among Hispanics (8.4%) than white households (1.7%).6 A language barrier such as limited English proficiency makes it less likely for some individuals to seek out banking services, making managing finances, paying bills and saving money more difficult.4 To make ends meet, some may resort to expensive alternatives such as payday loans with exorbitant interest rates.
Culture and attitudes towards money
In the Hispanic community, the family often comes before personal financial goals. EBRI reports that almost half of Hispanic workers prioritized supporting family over their own retirement savings.7 This family-first mantra can sometimes hurt. For example, helping an extended family member—sometimes at the expense of their own financial security—can stretch finances. Another barrier is the cultural stigma of discussing money matters openly, making seeking financial advice difficult.
Lack of trust in financial institutions
Hispanic people, especially those from immigrant backgrounds, often avoid borrowing money whenever possible. This is because they want control over their money. But there is also a lack of trust in financial institutions. According to an FDIC National Survey—13.2% of people cited not trusting banks as the primary reason for being unbanked. Similarly, 8.4% wanted more privacy. But the top reason (21.7%) for the unbanked was "don't have enough money to meet minimum balance requirements."6
3 Ways to Promote Financial Empowerment in Hispanic Communities
U.S. Hispanics are backed by $1 trillion in buying power, according to McKinsey & Company.8 Still, many Hispanic families struggle with building wealth.
Insufficient financial literacy can be an obstacle to building generational wealth. According to the 2021 TIAA Institute-GFLEC Personal Finance Index, the average correct responses to the P-Fin Index questions by U.S. adults stood at just 50%. However, among Hispanics, the figure was notably lower at 41%.9 While financial literacy can be passed down from generation to generation, in Hispanic families, though, this may not always be the case. This is because Hispanics may be less likely to have conversations about money matters.
The lack of financial literacy, compounded with other complex factors, such as high-interest loans, limited credit history and student debt, can make homeownership and investment—keys to individual and generational wealth creation—more difficult for Hispanic families. Fortunately, while formidable, these barriers are not brick walls. The following strategies can help break them down:
1. Create bilingual, culturally relevant resources
Carefully designed resources respecting and catering to the Hispanic community's beliefs, values and practices can help individuals access and learn about finances more easily. These resources should be available in printed form and online to align with an individual's preferred way of learning.
2. Forge community ties
Organizations that advocate for financial wellness can provide educational resources tailored to the needs of the Hispanic community. This can include access to expert-led workshops and seminars at local community centers, delivering valuable insights into managing money effectively.
3. Leverage financial education apps
Not everyone finds Excel sheets effective for financial management. Enter mobile apps that can help chart a course to financial freedom. One example is Mint, which offers budget creation, expense tracking and financial health monitoring. Another option, YNAB (You Need A Budget), can help increase financial literacy while helping to create better money habits.
Resources to Boost Financial Literacy
Knowledge of key terminology can help promote financial literacy. Take wealth, for example. It is defined as net assets minus liabilities. When it comes to determining your wealth, the formula is straightforward: assets minus liabilities. But figuring it out is easier said than done. Let's dive deeper.
Assets can include:
- • Money in the bank
- • Physical assets, like a home
- • Retirement savings
- • Investments
Liabilities describe what an individual may owe, such as paying for a:
- • Mortgage
- • Auto loan
- • Credit cards
- • Student debt
This quick lesson on key financial terms can be a foundation for even more learning. And the following tools and resources can help you take a deeper dive:
- • Economic Empowerment: A resource of the Hispanic Federation, this website focuses on topics ranging from building credit and capital to homeownership and community revitalization.
- • 8 Latino Financial Pros on Building Wealth and Knowledge: In this Nerdwallet article, Hispanic financial experts share their insights on wealth building and finances.
- • Yo Quiero Dinero: In this podcast, Hispanic change-makers share their financial insights and personal experiences about wealth building and money management.
- • Wealth Warrior: 8 Steps for Communities of Color to Conquer the Stock Market: This video previews a book written by financial educator Linda García.
- • Money Smart: A resource of the Federal Deposit Insurance Corporation (FDIC), this website includes articles and information about financial education programs that promote skill-building and positive banking relationships.
In addition to these resources, families can take financial literacy into their own hands through fun games that teach money management concepts such as saving money. For those looking to boost their savings, RVC offers a range of products to consider, including IRAs, high-yield savings (HYS) accounts, and money market accounts(MMAs).
Getting One-on-one Financial Guidance
Another way you can improve financial literacy is by connecting with a certified financial planner (CFP) or financial advisor who can guide you on financial matters and even offer one-on-one counseling sessions for personalized guidance. The following resources may help in finding the right match for your needs.
- • Looking for a Financial Advisor for Hispanic and Latino Americans?: This Wealthtender article offers an interactive map of financial advisors specializing in serving the Hispanic community.
- • CFP Board Surpasses 92,000+ CFP® Professionals, Increases Gender and Racial Diversity of Financial Planning Profession. The Certified Financial Planner Board of Standards (CPF), which sets and enforces the requirements for the CFP certification, has seen significant growth in the diversity of CFPs.
- • How to Find a BIPOC Financial Advisor or Planner: This Investopedia article provides guidance on locating a BIPOC (Black, Indigenous, and people of color) financial professional to help you navigate financial planning.
READ MORE: Personal Finance 301: Financial Advisors
Improving Hispanic Literacy Helps Drive the U.S. Economy
After paying all the bills, little money remains in the bank accounts of many in the Hispanic community. Understanding how money works and budgeting effectively is critical for saving money and achieving personal and generational prosperity. The journey requires taking proactive steps, including promoting financial education within the Hispanic community, providing increased access to financial literacy resources and making it easy for individuals to seek expert guidance.
Empowering Hispanic people with financial literacy benefits not only the community itself but the nation as a whole. In 2020, the GDP of the U.S. Hispanic population ($2.8 trillion) surpassed the GDPs of both the U.K. and India.10 In other words, the Hispanic community's growing influence on the U.S. economy is not to be ignored.
Alex Soto is a freelance writer and editor who covers everything from engineering and scientific research to commercial technology, personal finance, and sustainability. He writes for academic institutions, technology companies, and financial services firms.
READ MORE: The Ultimate Guide to Personal Finance
Sources/references
1. Wealth Gaps between White, Black and Hispanic Families in 2019, Federal Reserve Bank of St. Louis, January 05, 2021
2. New Survey Shows Latinos Are Struggling with High Debt Burdens, Low Savings Rates, and a Lack of Access to Affordable Bank Products, UnidosUS, September 27, 2022
3. Student Loan Debt: A Disproportionate Burden on Black and Latino Borrowers, California Department of Financial Protection & Innovation, March, 15, 2023
4. Overcoming Language Barriers in Banking, Investopedia, December 2, 2022
5. Big Banks Want Communities of Color to Trust Them. But It's Not So Simple, Los Angeles Times, June 19, 2021
6. 2021 FDIC National Survey of Unbanked and Underbanked Households, FDIC, Updated July 24, 2023
7. 2021 Retirement Confidence Survey: A Closer Look at Black and Hispanic Americans, EBRI, June 10, 2021
8. The Economic State of Latinos in the US: Determined to Thrive, McKinsey & Company, November 14, 2022
9. The 2021 TIAA Institute-GFLEC Personal Finance Index, TIAA Institute, April 1, 2021
10. Despite Pandemic, U.S. Latinos' Output Eclipses U.K. and India GDPs, Axios, September 22, 2022