According to the U.S. Department of Commerce, employment opportunities in science, technology, engineering and math (STEM) are booming, with 24.4 percent growth over the last decade. Yet, not enough students are pursuing degrees and careers in the STEM fields to meet the increasing demand. There are currently two STEM job openings for every qualified job seeker.
The lack of STEM representation is even more prevalent among Hispanics, who although account for approximately 20 percent of the U.S. population, only represent about 7 percent of the STEM workforce.
STEM workers enjoy a pay advantage compared with non-STEM workers with similar levels of education. Therefore, increasing the number of Hispanic students pursuing STEM degrees is one way to promote the continued socioeconomic mobility of Hispanic families in the U.S.
There are likely many factors that play a part in the underrepresentation of Hispanic students pursuing STEM – lack of information or academic resources, unfamiliarity of STEM opportunities among parents, etc.
However, according to a July 2018 study from the Hope Center for College, Community and Justice, a lot also has to do with finances. The study found that university students from low-income families who were offered need-based grant aid were 7.87 percentage points more likely to declare a STEM major than similar peers, representing a 42 percent increase.
What does this mean for credit unions?
The Hope Center study means credit unions have the opportunity to impact the number of Hispanic students who are pursuing STEM careers. This can be accomplished by connecting members with a variety of college savings products and opportunities – supported by culturally relevant financial education for parents and children. Consider the following opportunities:
• 529 college savings plans. These savings plans are tax-advantaged college savings vehicles and one of the most popular ways to save for college today. Much like the way 401(k) plans revolutionized the world of retirement savings a few decades ago, 529 college savings plans have revolutionized the world of college savings.
• Coverdell ESA plans. These savings vehicles are often used as supplements to 529 plans or other savings vehicles because they only allow parents to invest a maximum of $2,000 in them each year.
• UGMA/UTMA accounts. Parents or grandparents can also set up custodial accounts available under the Uniform Transfers to Minors Act (UTMA) or Unified Gift to Minors Act (UGMA). These accounts allow parents or grandparents to invest as much as they would like each year and in total. However, these investments are not tax-free like they are with 529 plans and Coverdell plans.
• College savings reward programs. Consider ways you might be able to help members save for college through purchases they’re already making. Can you offer credit card points or cash back that go toward a 529 plan or college savings account?
• Separate savings accounts. Perhaps the easiest solution for members is to set up a savings account dedicated to college savings and keep it separate from other accounts. Encourage members to set up automatic contributions and bolster the contributions anytime they receive a raise, bonus or other financial influx.
• Scholarships. Providing a scholarship may be just the financial – and confidence – boost a deserving high school student needs to attend college and pursue a STEM career. Just look at Gabriel Hernandez, who received a scholarship from JetStream Federal Credit Union, made possible by the Warren Morrow Hispanic Growth Fund Grant. In his scholarship essay, Hernandez wrote, “I know that I will succeed in college, but this scholarship will show me that others believe in me, too.”
No matter how your members plan to pay for college, it’s important that they save early and often. Consider offering educational classes and information – in both English and Spanish – to communicate the importance of saving for college and share resources to make it easier. The more financially prepared they are, the more likely it is they will go to college and pursue their dream career – STEM or otherwise.Leave a comment
Hispanics 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.
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?
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.Leave a comment
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.
• 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?Leave a comment
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.Leave a comment
Through Partnerships (and Great Videos) Ascentra Credit Union Accelerates Financial Education Initiative
To fully understand the reason Ascentra Credit Union is using its grant funds the way it is, it’s helpful to consider two important stats:
• 90 percent of Hispanic consumers stream video on their mobile devices.
• 7 in 10 Hispanics regularly use YouTube.
With the grant funds, the credit union has translated 16 video scripts into Spanish for a series of financial education videos. Not only are these videos available on Ascentra’s YouTube channel, they have also been airing on its local NBC affiliate, KWQC-TV, serving the Quad Cities area of southeastern Iowa and northwestern Illinois. The videos are available on the television station’s website, as well.
In addition, the grant funds enabled Ascentra to add Spanish subtitles to their existing financial education videos.
“The Warren Morrow Hispanic Growth Fund Grant has been instrumental in providing lasting and ongoing content in Spanish for Ascentra’s Financial Wellness program,” said Alvaro Macias, Ascentra AVP of community development. “We are now in the process of working with our local Spanish/English newspaper Hola America News to use their social media channels to share these informative one-minute videos to effectively reach local Spanish-speakers.”
Ascentra is also offering a series of financial education presentations in partnership with Esperanza Legal Assistance Center, a low-cost immigration service provider. The grant provided the funds needed to translate three presentations into Spanish. Spanish-language flyers were distributed throughout the predominantly Hispanic neighborhood in which the center is located, and the content was also used to promote the seminar on Facebook.
“We have plans to further utilize the translation services; we have some brochures that need to be translated and are planning to re-launch our website later this year,” Marcias said. “Our goal is to have the entire website available in Spanish.”Leave a comment
Recent research by CUNA Mutual Group’s TruStage reveals interesting insights about the unique makeup and preferences of Hispanics and other multicultural consumer groups. Below are some of the key findings from the What Matters Now research along with what they mean for credit unions seeking to establish more meaningful relationships with multicultural consumers.
Multicultural consumers have significant buying power.
Over the past five years, multicultural consumer groups have accounted for 100 percent of U.S. population growth and 61 percent of credit union growth. The annual spending growth rate for Hispanics is 4.1 percent, compared to 1.4 percent for Whites.
What it means for credit unions: Credit unions desiring to grow their memberships, assets and loan balances should place a strategic focus on their outreach efforts to Hispanics and other multicultural consumer groups.
Hispanic appreciation for apps over-indexes other groups.
Hispanic consumers are almost two times more likely than Whites to research financial products and services using mobile apps. Additionally, 17 percent of Hispanics reported applying for financial accounts and products through an app, compared to only 9 percent of Whites.
What it means for credit unions: To be relevant to Hispanic and other multicultural consumers, credit unions should be investing in mobile strategies. These cooperatives should ensure their mobile apps have a Spanish language option and the experiences are culturally relevant to Hispanic consumers.
Business loans are a desired product.
Hispanics are nine times more likely than Whites to take out a small business loan in the next five years.
What it means for credit unions: Invest in products and resources to help Hispanic entrepreneurs, such as small business-friendly loans, microloans and small-business financial education. Also, consider partnering with organizations that offer small business assistance, such as local Hispanic chambers of commerce and small business incubators.
Hispanics prioritize ease of use.
Twenty-three percent of Hispanics look for convenience in financial products and services, even if it means higher rates or fees, compared to only 9 percent of Whites. Flexible payment schedules and speed of lending are also more important to Hispanics than other groups.
What it means for credit unions: No two consumers are exactly alike. Providing a range of product options and fee structures will help you be relevant to a wider range of consumer segments. Offering instant online loan approvals is one way to meet a need for many Hispanic consumers.
Hispanic consumers tend to worry about finances.
Every expense category studied by CUNA Mutual causes Hispanic consumers concern — sometimes up to 20 percent more than other consumer groups. At the same time, Hispanics tend to have a stronger sense of generosity and community than other consumer groups.
What it means for credit unions: Think about ways to help relieve concerns for Hispanic consumers through relevant financial education and resources. Also, be sure to educate local consumers on the credit union philosophy of “people helping people,” and share stories of how your credit union and members are improving the lives of individuals and families in your community.
As you apply these findings to your credit union’s Hispanic outreach strategies, be careful not to over-simplify the data. “When examining the research findings, it’s important to remember a person is made up of many unique cultural aspects,” said Opal Tomashevska, manager, multicultural business strategy, CUNA Mutual Group. “Be careful not to over-generalize or create stereotypes from this information and apply it to all members of a certain group. The data shows trends and significant differences but does not attempt to speak for every individual.”Leave a comment
A recent study on the significance of gender for Hispanic savings and retirement found two important things:
1. Hispanic women have a huge appetite for financial education and a strong desire to save
2. Their savings could provide a critical safety net to America’s largest minority group.
“This study demonstrates that if financial information is communicated simply and respectfully, and in culturally and linguistically competent ways, Latinas, especially, will listen,” said Karen Richman, Ph.D., the principal investigator of the study, a collaboration between the National Endowment for Financial Education and the University of Notre Dame.
Reasons for Low Retirement Savings
Despite a desire to save, low earnings mean Hispanic women have much lower retirement account balances than any comparable demographic, the study found. Employment paths have a lot to do with these outcomes. According to the study, Hispanics switch jobs more frequently than other demographics. What’s more, they tend to accept positions that do not provide retirement savings benefits.
The research went on to show that Hispanics with employer-sponsored retirement plans are 50 percent more likely than whites to make hardship withdrawals. Hispanic women are more likely than Hispanic men to liquidate pensions with a lump-sum payment or to spend rather than reinvest their savings when they change jobs. Additionally, Hispanic women tend to see retirement accounts as a source of liquidity. They may take loans and early withdrawals, often to help others, and they end up paying large penalties.
How Credit Unions Can Help
Below are a few key takeaways from the study and what they mean for credit unions.
• Hispanics have the highest labor participation, and yet the lowest retirement security. Hispanic women would benefit from workplace financial education, particularly during job transitions as they are deciding what to do with retirement accounts. Credit unions can provide financial education, as well as investment and savings products in a way that’s relevant to this influential and growing audience.
• Hispanic women tend to be the administrators of family finances. The female head of the family often makes tough decisions without knowing all the options. Credit unions can address Hispanic women’s appetite for financial education and desire to save through direct outreach, relationship building and financial education opportunities. A great way to gain a better perspective on what Hispanic women need is through the creation of a Latina advisory group.
• Hispanic men and women are equally likely to participate in collective financial practices based on “confianza,” or “mutual trust.” Credit unions should work to develop relationships with Hispanics based on trust. They should position themselves as a dependable resource for the community through product accessibility, bilingual staff and community investment.
As this study reveals, a gap exists for Hispanic women in terms of saving for retirement. Credit unions, with their financial expertise and their people helping people philosophy, are well positioned to address this gap.Leave a comment
With the grant funds it was awarded, Members Credit Union was able to purchase Spanish seminar-in-a-box kits from CUNA, as well as materials for financial education sessions with Hispanic youth. Partnering with local organizations to conduct seminars has been a successful strategy for the Connecticut credit union.
More than 80 consumers participated in three seminars Members Credit Union conducted in late 2017:
In October, the credit union partnered with Family Centers to host a Spanish financial education seminar for parents who live in low-income housing. The following month, Members Credit Union conducted a Spanish financial education seminar for participants of People Empowering People. In December, the credit union hosted a seminar for Family Centers staff, many of whom are Hispanic. The focus of that event was on both personal finances and services available to their Family Centers clients.
“Each one of the completed seminars brought new members to the credit union, and referrals from our ‘first generation’ of new members are spreading and also yielding new members,” said Kathy Chartier, Members Credit Union president/CEO.
One of the participants in the November seminar owns Latin Colors magazine. During the seminar, he gave a testimonial about how he has benefited from his relationship with Members Credit Union. He is also giving the credit union the opportunity to share financial education in Spanish in every issue of Latin Colors throughout 2018 in addition to partnering on future seminars.
Members Credit Union also has plans to continue offering seminars in 2018, including:
• Sessions with elementary and middle school students involved in the Family First program
The credit union is already seeing results from its financial education efforts in terms of Hispanic membership and loan growth. In 2017, the credit union brought in 73 new Hispanic members (39 percent of all new members), compared to 23 (12 percent of new members) in 2016.
“The seminars, and the word-of-mouth referrals they have created, are probably our greatest source of new members and loans in 2017,” Chartier said.Leave a comment
In an article ranking the best cities for Hispanic entrepreneurs, WalletHub asked a panel of minority-business experts about the biggest challenges faced by Hispanic entrepreneurs. Nearly everyone mentioned access to capital and financial education.
“There is a clear issue with lack of access to capital to start and grow their venture,” said Pedro F. Moura, an MBA candidate at the Haas School of Business at University of California. “This is also influenced by cultural aspects in which Latinos would rather rely on family and friends for funding than outside investors. Plus, limited financial education also plays a crucial role in understanding the funding that could be unlocked by entrepreneurs.”
What does this mean for credit unions?
This means Hispanic communities represent a huge opportunity for credit unions to grow their lending business – and become those communities’ preferred financial provider. If there is a known preference for borrowing from family and friends, the question for credit unions becomes, How can we build and nurture a similar relationship with Hispanic members?
Below are a few strategies to consider.
Offer small business-friendly loans. Small-dollar loans or Small Business Administration (SBA) loans up to $5,000 can be a great way to help entrepreneurs get their ideas off the ground. With an SBA 504 loan, for example, a borrower may only need 10 percent of equity, rather than the 20 percent required with a more traditional loan. Also, the loan is normally divided into two parts. One, which tends to be 50 percent of the loan, is held by a lender. The rest is held by nonprofit groups, such as the Certified Development Corporation, with this portion backed by the SBA.
Provide microloans. Microloans are typically very small (under $500) short-term loans with a low interest rate, extended to self-employed individuals, new startups with very low capital requirements or small businesses with only a few employees. Microloans can be a good source of funding for a business to hire its first employee, cover startup costs or purchase initial inventory.
Offer Individual Taxpayer Identification Number (ITIN) loans. ITIN loans are designed to help people who have a tax ID number but are not eligible for a Social Security number. Credit unions see the possibilities in serving a population that is not being served well by traditional financial institutions and they understand the value of inclusivity.
Provide lines of credit and credit-building loans. During the early stages of developing their companies, entrepreneurs may not have diversified enough to generate a constant positive cash flow. Lines of credit accommodate the seasonal credit demands of businesses along with ups and downs in cash flow. They also enable entrepreneurs to purchase inventory in anticipation of future sales. Credit-building loans, on the other hand, can help entrepreneurs build their credit as they work to grow their business.
Offer small-business financial education. Even the most robust small-business lending program can be ineffective without the right education plan in place to help entrepreneurs understand their options and select the right loans for their businesses. Ensure your marketing and education materials are available in Spanish and are culturally relevant to Hispanic populations.
Build community partnerships. One of the best ways to expand your credit union’s Hispanic entrepreneur outreach efforts is to partner with organizations that offer small business assistance for Spanish-speaking entrepreneurs. Examples include local Hispanic chambers of commerce and small business incubators.
Credit unions desiring to be Hispanic entrepreneur-friendly should work to build the right mix of lending products supported by a strong financial education program. Those that get it right will not only provide a much-needed service to Hispanics in their communities, they will also benefit themselves through lending and membership growth.Leave a comment