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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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    Greater Income Mobility among Hispanics Spells Opportunity for Credit Unions

    Posted by on July 16, 2018

    In our last blog post, we shared several stats that reveal how Hispanics in the U.S. are driving America’s economic growth. A recent study by Stanford, Harvard and Census Bureau researchers further confirms this point and signals additional opportunities for credit unions.

    The study shows Hispanics are escaping poverty and climbing the economic ladder at nearly the same pace as their white peers.

    THE RESEARCH

    •  Among Hispanics in the U.S. who grew up in the lowest income segment, 45 percent made it to the middle class or even higher, compared to 46 percent of whites.

    •  Of those who grew up in the lower middle class segment, 28 percent made it to the upper middle class or higher, compared to 35 percent of whites.

    •  Nearly half of Hispanic high school graduates, ages 18 to 24, were in college in 2016, up from just under a third in 1999.

    THE CREDIT UNION OPPORTUNITY

    Consider how you can help more Hispanic members become homeowners. As Hispanic income grows, so will the ability to buy homes and make other financial investments. In 2017, more than 167,000 Hispanics purchased a first home, taking the total number of Hispanic homeowners to nearly 7.5 million (46.2 percent of Hispanic households). Hispanics are the only demographic to have increased their rate of homeownership for the last three consecutive years. By offering a variety of home loan options supported by culturally relevant education, credit unions can help more Hispanics realize the dream of homeownership.

    Offer programs to help Hispanic members save for retirement. A recent survey found 71 percent of middle-income Hispanics feel they are behind on preparing for retirement, compared to 63 percent of the general population. At the same time, many have difficulty securing the financial services that can help them address these issues. The survey found 59 percent are unsure who to go to for financial advice and guidance; 53 percent say it’s difficult to find financial services companies that know how to help households like the ones they belong to; and 42 percent believe they have different financial planning needs than the average household. Fortunately, increasing income mobility will allow Hispanics to start saving for retirement sooner. Consider how your credit union can be the financial services provider many Hispanics are looking for to help with their retirement savings needs.

    Partner with high schools and colleges to offer financial education to students. While more Hispanics are attending college, their graduation rates tend to be lower than their white peers. A report by the National Student Clearinghouse Research Center found that 45.8 percent of Hispanic students who entered college in 2010 completed their degree within six years, compared to 62 percent of whites. This disparity could be the result of several different factors, including financial challenges. By offering culturally relevant financial education on topics like budgeting and student loans – as well as encouraging students to establish a relationship with a credit union before or during their college years – you can help more Hispanic students graduate from college and land higher paying jobs.

    While the numbers on Hispanic income mobility are encouraging, there is still work to be done. Who better to do it than credit unions?

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    Hispanics Are Driving U.S. Economic Growth. Here’s Why Credit Unions Should Care.

    Posted by on July 2, 2018

    Anyone curious about the Hispanic community’s contribution to the U.S. economy need not look any further than these stats from the first half of this decade, provided by the Latino Gross Domestic Product (GDP) Report:

    • At 2.9 percent, the U.S. Hispanic GDP experienced the third-highest growth rate in the world, behind only China and India. It was nearly 70-percent higher than the non-Hispanic U.S. GDP growth rate of 1.7 percent.

    • If it were an independent country, the U.S. Hispanic GDP would be the seventh largest in the world, larger than the GDP of India, Italy, Brazil or Canada.

    • While the non-Hispanic U.S. workforce shrank by about 4,000 workers, the Hispanic U.S. workforce grew by nearly 2.5 million, making possible an overall increase of 2.4 million in the U.S. workforce, ages 24 to 64.

    • The U.S. Hispanic college graduate population, ages 20 to 24, grew by 40.6 percent, compared to 13.6 percent for the non-Hispanic population in the same category.

    • As young Hispanics enter the workforce and older non-Hispanics leave it, the Hispanic GDP will account for an increasing portion of the total U.S. GDP growth, projected to be 24.4 percent of total U.S. GDP growth by 2020.

    What do these stats mean for credit unions?

    • As the Hispanic community’s impact on the U.S. economy continues to grow, so will its need for financial services. There’s never been a better time for credit unions to start (or grow) a Hispanic membership growth strategy. Those that don’t will find it increasingly difficult to grow their total membership, deposits and loan balances.

    • Young Hispanics will be an increasingly important pool of talent as credit unions grow and hire new employees. As college-educated Hispanics continue to enter the workforce at a faster rate than non-Hispanics, it’s important for credit unions to review their recruiting and hiring processes to ensure they are appealing to Hispanics.

    • Dispelling myths about Hispanics is a joint effort. Despite the above statistics, some segments of the U.S. population are not aware of the essential role Hispanics play in the success of the domestic economy. Consider ways you might partner with organizations and Hispanic leaders in your community to help tell the story.

    In short, the U.S. Hispanic community is growing in number, spending power, education and – for growth-minded credit unions – opportunity.

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