MADISON, Wis.—A new study indicates that CUs can play an important role in helping the Hispanic community—even highly educated Latinos—better manage their finances.
The study by the Filene Research Institute reveals that many Hispanics show signs of having money issues. Among the findings:
- Almost eight-in-10 highly educated Hispanics have at least one credit card, and half of these cardholders report behaviors that can damage credit scores, increase interest rates, and harm their future borrowing capacity.
- 35% percent of this group had used one or more alternative financial services within the five years preceding the survey.
- 22% report taking loans or hardship withdrawals from their retirement accounts.
The results from the study highlight the need for credit unions to play a leading role in serving highly educated Hispanics, Filene said.
“If these are the results for the highly educated, imagine the challenges of others. The data clearly indicate a strong disconnect between Hispanics and traditional financial institutions,” Filene stated on its analysis. “Since highly educated Hispanics show low levels of financial literacy, programs to appeal to and educate this population will do much to improve their financial standing. Similar to other American subgroups such as Gen Y and baby boomers, Hispanics struggle with personal financial knowledge, with only 12% showing high financial literacy.”
Other issues facing highly educated Hispanics:
- Nearly 40% can be classified as “financially fragile.”
- Hispanics are less likely than whites to correctly answer any of the survey’s five financial literacy questions and 20 percentage points less likely to demonstrate basic financial literacy.
- Nearly 60% feel that financial advisors are too expensive.
In 2013, the U.S. Hispanic market represented $1.2 trillion purchasing power, with that figure expected to rise to $1.5 trillion by 2015. The United States is now home to 52 million Hispanics; by 2050, the number is expected to grow to 133 million, said Filene, which encouraged CUs to consider the following tactics to help Hispanics:
- Increase engagement efforts with Hispanics through marketing and personal outreach.
- Offer low-cost products and services to eliminate the need for Hispanics to engage in expensive financial behaviors.
- Utilize Spanish-speaking financial advisors to help foster a culture of comfort and trust for potential Hispanic members.
- Encourage incentive-based savings programs to help build rainy day or emergency funds.
The study is the third report in Filene’s financial capability series. It relies on data from 1,553 respondents from the 2012 National Financial Capability Study, supported by the FINRA Investor Education Foundation.