Older Latinx woman and adult daughterBackground

Migration is primarily an economic phenomenon and occurs in stages; first geographical which takes little time, and then cultural which may take decades; it’s called assimilation. Assimilating the ways by which Americans manage their money has proven to be particularly difficult for Hispanics and contributes to the significant wealth gap observed between Whites and Hispanics. 

Money attitudes are closely linked to the financial development of countries and affect our culture. Let’s first consider the significant gap in understanding caused by the development of financial markets in Mexico, which influences a significant number in the Hispanic community in the U.S.

  • Land titling lags by at least two centuries in the U.S.
  • DJI had 25 companies in 1886 vs. BMV which had 23 companies in 1986
  • First-time emission of Treasury Bills was 1929 in the U.S. and 1978 in Mexico. 1963 vs. 2000 for Treasury Bonds.

The problem we want to solve

Translating educational content from English to Spanish, without considering the differences in the evolution of financial markets, is one important factor that explains why society has fallen short in servicing the financial needs of the Hispanic community. Many Latinos do not have the context to identify the benefits associated with long-term investments, do not have knowledge of asset classes, and certainly do not have trusted role models to ask questions about money. Many Latinos do not have the frame of reference to challenge financial products presented to them. It is easy to understand why Hispanics are targeted by predatory lenders. 

Distrust in banks and financial institutions is another cultural bias that many Hispanic immigrants have yet to overcome. In our 2019 research on the Retirement Expectations of Mexican Immigrants, one of the parameters studied was related to personal savings. From 2016-2019 a 22% increase in the number of people saving was observed. The amount of savings also increased, with respondents having savings in excess of six months increasing from 27.6% in 2016 to 40% in 2019).  (https://hispanicwealth.com/#sec-surveys). There was no indication that those savings were invested.

What can we do?

Practitioners that want to provide financial literacy would benefit from considering the different circumstances of cultural influence. An example of how the author took into consideration the rural background of Hispanics vs. the urban background of most Americans can be observed in this video about compound interest. Note: video is in Spanish. 

Guest Contributor: Manuel Carvallo is president of Hispanic Wealth LLC, a group of professionals focused on preparing Hispanics for retirement.

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