Jun 03 2015

Financial Capability among Highly Educated Hispanics

 Hispanics are becoming influential players in the US economy. The purchasing power of Hispanics was $1.2 trillion in 2013 and is expected to rise to $1.5 trillion by 2015. The United States is now home to 52 million Hispanics; by 2050, this number is expected to grow to 133 million. US Hispanics, on average, are younger than other racial and ethnic groups. This combination of youth and population growth means US Hispanics will make up a greater share of the workforce in the coming years. 

This third report in our financial capability series explores the financial condition of highly educated Hispanics. It relies on key data from the 2012 National Financial Capability Study (NFCS), supported by the FINRA Investor Education Foundation. The sample we look at in this report is composed of 1,553 respondents who designate their ethnicity as Hispanic and who report “some college” or more as their highest level of education completed. We want to paint a clear picture of highly educated Hispanics’ assets, liabilities, financial fragility, financial literacy, and use of financial advice.

Even among the highly educated, the underlying themes and findings are worrisome:

  • Almost 8 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% have used one or more alternative financial services (AFS) within the five years preceding the survey.
  • 22% report taking loans or hardship withdrawals from their retirement accounts.
  • Nearly 40% can be classified as “financially fragile.”
  • Hispanics are less likely than whites to correctly answer any of the five financial literacy questions and 20 percentage points less likely to demonstrate basic financial literacy.
  • Nearly 60% feel that financial advisors are too expensive.

The results from the study highlight the need for credit unions to play a leading role in serving highly educated Hispanics. 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. 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. Credit unions should consider the following tactics:

  • 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 rainyday or emergency funds.

Filene thanks our generous partners for making this research possible. 

Report Number 353