It’s no secret that Latinos are a huge contributor to the U.S. economy and instrumental in our society’s growth. Between 2010 to 2021 we, as Hispanics, grew by 11.9 million, from 50.7million in 2010 to 62.6 million in 2021. Today we make up 18.9% of the U.S. population. This increase was the largest of any one race in the U.S. during this time span. With the tremendous growth we’re having, why is it that we continue to consistently place last when it comes to saving for our future?
According to research done by the Federal Reserve, Hispanics have the second lowest net worth at $165,000 of any race other than African American’s who have a net worth of $142,500. This is including our primary home which tends to be our biggest asset. What race comes in first? Well, that would be Caucasians with an average net worth of $983,400. Big difference huh.
So, what’s the reason for the huge difference in net-worth from one race to another? White privilege? Discrimination? I don’t believe any of that is the reason. We live in time where we have access to more free information than ever before in history. Every individual, no matter their race has access to the same information, if want to look for it.
I believe the reason for this wealth gap has less to do with discrimination and more to do with our culture.
There is a large part of Hispanics that either immigrated from our southern neighboring countries or are first generation, those born in the US to parents born outside of the US. In some of those neighboring countries we are expected to work until the day we can no longer physically do it. After that, our family members take over, help us financially and watch over us at our older age. There isn’t really a need to think about planning for retirement if its been this way for centuries.
Investing in the stock market has never been a big part of our DNA, especially if you come from small agricultural towns. Our form of investing is in the equipment we use on a day to day basis, equipment that will help generate funds to support our household but has little to no growth potential in its actual value.
It looks like this way of thinking migrated with us. Hispanics don’t usually invest in retirement accounts or work for companies that offer such things. The Federal Reserve study show us that Hispanics, on average are 21% less likely to work for a company that offers a 401k compared to other races. Not only do we have less access to a 401k but also use it extremely less then other races when it’s available for us. If our parents, grandparents never used such a tool they will probably be less likely to encourage us to participate, compared to if they had one themselves.
What if an employer retirement plan isn’t available for us, there isn’t anything else we can do, right? No, there are other things we can do. Like opening an IRA on our own. But once again, we come to the conclusion that Hispanics don’t do this either, no matter how young or old we are. For example, only 26% of Hispanics under the age of 35 have a retirement account opened. This is the lowest among any race.
If were don’t work for a company that offers a retirement account and we don’t open one up on our own, what can we expect our overall retirement savings to be?
When you look at the numbers of who save and in what, it’s no shock we Hispanics have a significantly lower net worth than our Caucasians counterparts.
We continue to grow at a significant pace in this country, but our population shouldn’t be the only thing growing. Our assets should be growing significantly as well.
What can we do to change this?
Although the tides are starting to change, there is still a drought with financial information tailored to Hispanics or in Spanish. Traditionally Hispanics have not been first in line to reach out to a financial advisor or have a big enough net worth for financial advisors to focus on this market. We need to change this. If the information is not coming to us, we need to go to it.
As a financial advisor I often reach out to young Hispanics and offer my services. Too often im met with a “im not interested” “not right now” “I can’t afford it”. Too often I see young Hispanics repeating the steps many others committed before them, choosing to focus only on today and never in tomorrow. This worked for our ancestors because of where we lived and how or culture worked. However, this is no longer a viable strategy we can afford to continue with
So why do we consistently place last when saving for our future? Lack of information that is tailored for Hispanics, culturally we have not been a contributor to investing in the stock market. We tend to work for companies that offer less access to retirement accounts. We don’t take it upon ourselves to open retirement accounts on our own either. The result of this can only be one thing, we continue to place last in every statistic that has to do with building wealth.
Weather we do it on our own or we work with a professional we need to take a step towards a better tomorrow.
What are you doing to grow you net worth?