Gaining financial knowledge can help Hispanics save and invest money

From saving for retirement to building wealth, Hispanics are lagging behind. They can also stay away from traditional bank accounts.

Several reports highlight the disparities, including one from the St. Louis Federal Reserve which found that Hispanic and Latino families had just $38,000 in median wealth in 2019, or 21 cents for every dollar of white family wealth.

Meanwhile, more than two-thirds of Hispanic households aren’t saving anything through employer-sponsored plans, like 401(k), and just 8% say they have an Individual Retirement Account or similar plan, a report of the morning star find. More than 12% of Hispanic households do not have a bank account, according to the Federal Deposit Insurance Corp.

While the issue of the wealth gap needs to be addressed, acquiring financial literacy can go a long way towards financial stability, suggests Yanely Espinal, director of education outreach at Next Generation Personal Finance.

Hispanics have lower levels of financial literacy than whites, according to the TIAA Institute-GFLEC Personal Finance Index. Hispanics answered 41% of the questions correctly, compared to 55% of whites.

“For my parents and many other Spanish-speaking immigrants, a lack of financial literacy translates into thin credit records with poor or no credit scores, no knowledge or ownership of retirement or brokerage accounts, and frustration with traditional banking,” said Espinal, whose parents immigrated to the United States from the Dominican Republic.

The Covid-19 pandemic has made it clear that Latino and Hispanic workers are overrepresented in low-wage work environments, she noted. When limited funds are split in multiple ways, people are forced to prioritize short-term financial needs over long-term goals, she said.

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“This results in repeated cycles of financial hardship,” said Espinal, a member of the CNBC Invest in You Financial Wellness Council.

“Learning about Roth IRAs on custody and on-custody brokerage accounts for young Hispanics and Latinx people, and helping families understand the benefits of starting early with 529 College Savings Plans are incredibly powerful ways to change the story.”

To that end, CNBC Invest in You is working with Telemundo to bring Spanish-speaking Americans our Money 101 newsletter in Spanish. (Click here to sign up for Dinero 101.)

The newsletter, from CNBC senior personal finance correspondent Sharon Epperson, is an 8-week course in financial literacy and includes help with budgeting, saving for retirement and creating a retirement fund. emergency. By registering for the course, you will also receive bonus newsletters to help you manage financial issues throughout the pandemic.

Not only will you gain financial knowledge, but you can use this information to open conversations between family members.

“Culturally, conversations about money are something that most Latino families don’t have,” said Louis Barajas, a certified financial planner who works with the Latino community in East Los Angeles. .

He urges people to read and speak up if they don’t understand something.

“It’s about not being ashamed, not feeling guilty, not feeling embarrassed, not feeling shy to say, ‘I don’t understand, can you please explain to me? please,'” he said.

REGISTER: Dinero 101 is an 8-week financial freedom learning course, delivered weekly to your inbox (Spanish version), or if you would like to receive the Money 101 English version, click here.

Disclosure: NBCUniversal and Comcast Ventures are investors in tassels.

Sarah J. Greer