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  • What Financial Optimism Among Hispanics Means for Credit Unions

    Posted by on August 13, 2018

    Couple Taking SelfieHispanics are more optimistic about their financial futures than other consumers segments. As multicultural marketing expert Isaac Mizrahi shares in Forbes, in the next 12 months…

    • 9 percent of Hispanics are planning to buy a house, compared to 6 percent of non-Hispanics. This means Hispanics, who represent about 18 percent of the U.S. population, may represent 22 percent of all new home buyers in the next year.
    • 14 percent of Hispanics are planning to buy a new car, compared to 11 percent of non-Hispanics.
    • 11 percent of Hispanics plan to switch jobs, compared to 8 percent of non-Hispanics.

    More than 3 percent of Hispanics plan to make their first financial investment ever, compared to 1.5 percent of non-Hispanics. Hispanics may represent almost a third of all new investors in the market in the next 12 months.

    Not only do Hispanics tend to be more optimistic about finances than other consumer segments, but their optimism appears to be growing. In an April 2018 poll conducted by the Florida Atlantic University Business and Economics Polling Initiative, 69 percent of Hispanics indicated they are financially better off today than a year ago, up 4 points from the previous quarter.

    In addition, 78 percent of Hispanics are optimistic about their financial future, up 7 points from the previous quarter. Finally, 69 percent of Hispanics think it is a good time to purchase big-ticket items for their homes, up 17 points from the last quarter of 2017.

    What’s driving the increased optimism?

    There are likely many factors driving financial optimism among Hispanics – including low unemployment, greater income mobility and economic growth and stability.

    Another important factor is the number of Millennials who make up the Hispanic population. Pew Research Center has found 90 percent of Hispanics below the age of 30 report they expect their finances to get better in the next year, compared to 81 percent of the Hispanic population overall.

    This is important because Millennials make up about 40 percent of the U.S. Hispanic population – about twice the proportion that Millennials make up in the overall U.S. population.

    What does Hispanic optimism mean for credit unions?

    This is all good news for growth-minded credit unions desiring to serve Hispanics in their community. With increased optimism generally comes an increased need for the types of financial services credit unions are uniquely positioned to provide. Below are three areas you may want to review in response to these findings.

    Home mortgages and vehicle loans. Evaluate your loan programs to ensure they are relevant and meaningful to Hispanic consumers. Hispanics are declined for conventional home loans at a rate that’s seven percentage points higher than the national average, according to the 2016 State of Hispanic Homeownership Report. Do your programs offer low down payment options and flexibility in determining qualifying income? By expanding your data sources beyond income and credit scores to evaluate a consumer’s ability-to-repay, you may be able to qualify more good borrowers.

    Savings and investments. With more Hispanics interested in saving and investing their money, it’s a great time to offer culturally relevant education and programs to encourage these important habits. The need is there. According to a 2014 Prudential Research study, 19 percent of Hispanics had individual retirement accounts, compared to 39 percent of the general population. Only 6 percent had investments in individual stocks, bonds and mutual funds, compared to 18 percent of the general population. And 62 percent of Hispanics had a savings account, compared to 81 percent of the general population. Consider how you might grow that number among your Hispanic membership. More savings means a better bottom line for your credit union, allowing you to originate more loans and help more consumers. It’s a true win-win.

    Millennial outreach. The younger consumers learn the importance of building credit, saving and investing, the more prepared they will be for the future. Because Millennial Hispanics tend to be even more financially optimistic than older generations, it’s important that credit unions seek to establish a lifelong relationship with them when they’re young.

    Best of all, the more credit unions do to help Hispanics in their communities, the more financially optimistic they will become. And that’s good news for credit unions and Hispanic consumers alike.

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