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
Over the next few months, we will write on a series of financial inclusion topics as they relate to the Hispanic culture. This first one focuses on an aversion to debt that exists within many segments of the Hispanic population. It also offers ideas for credit unions on how to provide education and value in this area.
Although there’s no one right answer to this question, it’s important to remember conventional banking as we know it in the U.S. may not be part of the traditional Hispanic upbringing. As Glenn Llopis, founder of the Center for Hispanic Leadership, wrote in a HuffPost blog post, “This has led to a general mistrust of banks and, when coupled with a natural skepticism, would account for the $53 billion attributed to ‘unbanked’ Latino households (according to a research arm of the University of Virginia’s Darden School of Business).”
We see the effects of debt aversion in higher education, as well. According to Hilda Hernandez-Gravelle, senior research fellow for the Institute for College Access & Success, several cultural factors contribute to the difficulty Hispanic students often experience when it comes to securing financial aid for college. These include fear of debt, mistrust of lenders and conflict between family obligations and educational aspirations. “While Latinos generally have a strong commitment to education, many believe that if you can’t afford to pay for it up front, you can’t attend,” Hernandez-Gravelle writes.
How can credit unions help?
Avoid a one-size-fits-all approach to financial education.
It’s important to remember different cultures and financial classes have different perspectives on money and financial services providers. For example, as psychologist Miquela Rivera, PH.D., points out, for first-generation, low-income Hispanics, accumulation of money might be, at first, the main goal. Later, they may realize money in itself is not a satisfier, but that satisfaction comes from doing what they want in life, without excessive financial worry.
“Latino students who are financially literate must view money as a means, tool or resource for getting things done, not an end in itself,” Rivera writes. When credit unions help their Hispanic members achieve this mindset, those members begin to see more clearly the importance of establishing credit and that debt, when managed responsibly, can actually be beneficial.
Focus on cultural needs vs. language barriers.
Rather than focusing on literacy and word-for-word translations, Principal’s Hispanic Market Program focuses on context and cultural needs to engage Hispanics in retirement savings. The program promotes a “transcreate vs. translate” ideology, focusing on context in written educational materials rather than the word-for-word translation. Also built in is incorporating simplicity in presentations and correcting misinformation, such as the kind that leads to distrust in financial institutions.
Credit unions should take a similar approach to educating Hispanic members and prospective members about debt and creditworthiness.
Build trust and credibility.
Llopis recommends offering culturally relevant and language-appropriate products and services backed by bilingual staff. He adds it’s also important to show genuine concern for the community – for example, by active involvement in Hispanic issues and sponsorship of local events. The community will be more likely to trust the education a credit union offers if it’s playing an active role in the betterment of their daily lives.Leave a comment
Sometimes the best way to lead a successful strategy is to have survived an unsuccessful one. That is precisely the spirit with which Anne Hagen is approaching her credit union’s second go at Hispanic membership growth. The vice president of marketing for Iowa’s Community 1st Credit Union, Hagen believes one of the biggest lessons learned from the cooperative’s first attempt was that a single champion of the program is not enough.
“We identified how important it would be to serve the Hispanic community back in 2007,” said Hagen. “When we lost the key person leading that effort, however, the program fizzled out. After continuing to evaluate the segment and truly understanding how underserved it is, we knew we had to try again.”
President and CEO Greg Hanshaw explained that the calling to do more is rooted in the credit union’s 80-year history. “Our goal as an organization has always been to personify the credit union philosophy of people helping people. Although that can sound cliché, it’s the real deal around here. And it’s a huge part of why we felt years ago it was critically important to reach the Hispanic market.”
CU Recognizes Need for Grassroots Leadership
The credit union recognized a Hispanic member growth plan would need to be a cooperative-wide initiative supported by everyone from frontline staff to the C-suite. Yet, they also understood the importance of hiring an empathetic community member. This individual would help credit union staff better identify and overcome obstacles to engaging the Hispanic community. David Suarez joined the credit union as Bilingual Community Development Manager in June 2015. Suarez then helped recruit Edith Cabrera, the credit union’s first Hispanic board member.
“When David came to the credit union, he did not sit back,” said Hagen. “He immediately identified those areas where we weren’t doing enough for the community and started building initiatives from scratch. He spearheaded partnership with Coopera to help us learn best practices and with local Hispanic organizations to get us connected to the community in a grassroots way.”
According to Hagen, Suarez has a knack for explaining to community members how a credit union can help. “His message really resonates with the Hispanic people in the communities we serve.” The result has been close relationships with many credit union members, many of whom attribute their financial successes to his guidance.
That knack for explaining extends to Suarez’s influence inside the credit union. “One thing I’ve learned from David is a lot of the folks in Iowa have come from cultures and backgrounds where they didn’t trust the financial system that was built to provide those types of services,” said Hanshaw. “So we have an opportunity to show what a not-for-profit cooperative is and how it is uniquely built to provide services to people who may not meet the right criteria at a traditional financial institution.”
To read more about Community 1st all-in approach to Hispanic membership growth, download “Hispanic Member Growth Not Just for ‘Gateway States’ Anymore.”Leave a comment
Entrepreneurialism and a solid work ethic are strong tenets of the Hispanic culture. Given these characteristics, it’s no surprise the number of Hispanic-owned businesses in the U.S. has expanded as rapidly as it has. Since 2007, these firms have grown an astounding 57 percent to more than 4 million.
Like most small businesspeople, Hispanic leaders need strong guidance, both financial and otherwise, to achieve and maintain success. The potential to increase business revenues is seen in the fact Hispanic-owned businesses have a tendency to generate average annual incomes well below the average in the U.S. (even below the average for minority-owned businesses).
Credit unions, particularly those focused on the growth of their Hispanic memberships, are well-positioned to provide this guidance. That’s because many of the cooperatives that are planning – maybe even executing – strategies to attract Hispanic consumers are already on track to serve the community’s business owners.
Hispanics account for one out of every five new entrepreneurs in the U.S. Entrepreneurs rely heavily on financial services. Yet, credit unions will do well to consider creating programs that go beyond business loans and other financial products to help business owners optimize operations and grow their firms. Consider solutions that reduce business expenses, such as payroll costs, for example. Offering the employees of Hispanic businesses payroll direct deposit to checking accounts or to prepaid reloadable cards will help the owner eliminate payroll check printing and will provide employees more access to their money. This type of a program can be mutually beneficial, as the business saves time and money while the credit union establishes potentially long-term relationships with its employees.
Like any new product or service offering, the development of Hispanic business solutions should start with research and data analytics. This will allow the credit union’s product development team to segment the market and provide truly valuable, highly customized services. Start with your existing Hispanic members. You may be surprised to learn how many are business owners who may also be willing to help the credit union better understand their needs.
As your research is underway, begin to build relationships with local organizations that already serve Hispanic entrepreneurs and small businesses, such as Hispanic chambers of commerce. Your credit union can work in conjunction with these organizations to provide a much-needed service, connect with the community and begin to build trust.
Once you have a better understanding of the make-up, needs and behaviors of the local Hispanic business community, come back to your own capabilities. Evaluate your existing business and consumer service offerings to see where they fall short or how they may be adapted to the Hispanic business owner. Evolving your products, rather than expecting Hispanic members to adapt to them, is critical for success with this market.
Javier Palomarez, president and CEO of the United States Hispanic Chamber of Commerce, says Hispanic businesses are first and foremost American businesses. “Every tax bill we pay, every job we create, every product we manufacture and every service we provide goes to benefit our nation’s economy,” he wrote. And those businesses will do so to the tune of $660 billion this year.Leave a comment