Banking on Us: Financial Literacy in the Hispanic Community

The rapidly increasing Hispanic population in the U.S. generates billions of dollars every year. Marketers take a look at Latinos’ purchasing power and then identify niche markets in hopes of making big profits. According to the Selig Center for Economic Growth, Latinos spent proportionally more on groceries, telephone services, furniture and major appliances than non-Latinos. It seems safe to assume that this spending pattern is due to the fact the Hispanic households are larger on average than non-Hispanic households, and also many Hispanics have relatives abroad and make international phone calls on a regular basis.

On the other hand, Latino households do not invest as much on healthcare, entertainment, education, personal insurance and pensions. In addition, different sources estimate that about half of the Hispanic population in the U.S. is unbanked. In fact, many attribute Latinos’ lag in home ownership, healthcare coverage, and savings for education and retirement to lack of knowledge or financial literacy.

This disparity in access to and familiarity with financial services seems to vary slightly by generation and/or income levels. A 2005 survey by Roper Public Affairs revealed that the majority of middle-age Hispanics with household incomes of at least $45,000 says that they are financially successful; however, around a third of them still say they need help making financial decisions. According to a special report from the American Banker, Hispanics are least likely to invest in stocks or mutual funds, even at relatively high income levels.

Housing policy analysts agree that Latinos are more likely to choose a home mortgage provider by relationship, rather than by price. This tendency combined with their nontraditional credit backgrounds direct them to subprime lending products.

Besides good know-how in home buying and investing, Latinos tend to favor check-cashing and money transfer stores more than traditional banking institutions. Banks have made modest efforts to enter this market and to attract Latino customers for years. A major U.S. bank says that about half of the organization’s new Hispanic clients first visited one of their locations to use a remittance service.

Financial institutions have started to aggressively invest in financial education of Latinos through various media, including bilingual websites, television networks, newspapers, and marketing products. Moreover, many institutions are building partnerships with non-profit community organizations to go beyond financial literacy. These types of programs promote and facilitate economic empowerment within Latino neighborhoods through interactive “talleres” that cover everything from the basics of banking, obtaining a matricula consular and a federal tax identification number for immigrants, to first-time home buying and investing.

As Hispanic professionals, how do you feel about making important financial decisions? Have you ever met with a financial consultant? Do you have access to financial services education? An upcoming NSHP online survey will tackle some of these issues. We invite you to leave your comments in our [Financial Literacy: Friend or Foe?|financial literacy] forum, or send them to roger_knight@email.com