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Hispanics’ Personal Finances And The Recession

When it comes to personal finance, the Hispanic population has some unique characteristics which have distinguished their experience of the recession from that of other groups.

Overall, Hispanics are less connected to banks and credit cards than the general population.  Thus, they haven’t been as affected in losses to their 401(k)s and investments, nor have they incurred as much credit card debt.  However, the other side of being disconnected from banks is that Hispanics typically have less money saved for retirement, which has many elderly Hispanics anxious about their future.

A study by Synovate found that only 77% of Hispanics have bank accounts, compared to 98% of the general population.  One theory is that Hispanics use banks less because they don’t trust them as much as the rest of the population.   Many Hispanic immigrants come from countries where banks were unstable due to fluctuating economies, and that history leads them to rely on cash.

Along with distrust is dissatisfaction with bank services.  Synovate’s study also found that only 29% of less acculturated Hispanics said that they felt treated well by financial institutions, compared to 40% of more acculturated Hispanics and 41% of the general market.

Hispanics also are less likely to use credit cards than the general market.  The website U.S. Banker reported that only 51 percent of Hispanics use credit cards, compared to 74 percent of general market consumers.   Moreover, Hispanics report having less debt: The Pew Hispanic Center found that Hispanics were significantly more likely to report having no credit card or installment loan debt, 28% compared to 19% of the general population.   In a study done by Experian last November, 58 percent of Hispanics reported not having used a credit card for an entire month.

Part of this is a cultural difference between Hispanics and non-Hispanics.  As one columnist observed on the site Hispanic Market Advisors writes, Hispanics “have been taught to buy when you have the money to pay. Deficit financing has not been a concept that makes sense to most Hispanic consumers.”

One positive result of this, according to Nielsen, is that Hispanics do not need to save as much money in order to pay off debt.  As Hispanics overall carry less debt, more of their income is disposable compared to other groups.

Where do they tend to invest it?  One financial product that many Hispanics invest in is remittances, funds sent to relatives in their home country.  One Synovate study said that 54% of U.S. Hispanics send money to their friends and family outside of the U.S. , and three out of 10 send money once a month or more, with amounts averaging $230.

Investing in retirement is often less of a priority for both Hispanics and African-Americans, who tend to value the needs of their children and family more than savings for the future.  BusinessWeek reported that these familial bonds tend to be even more intense than Hispanics than among African-Americans. Andreas Tapia, chief diversity officer for Hewitt Associates, put it this way: “If your mama lives with you—and others in your extended community are struggling to get by—putting aside money that you can’t touch for the next 15 to 20 years feels selfish and inappropriate.”

In today’s economy, that decision has had real costs for many older Hispanics.  In a recent AARP survey, two out of three Latinos said they had little or no confidence they would be able to cover the cost of a major illness or afford their retirement.

The downturn has affected the Hispanic population, especially in terms of the job market.  However, there also remains a good deal of optimism among Hispanics about their financial future: according to the Pew Hispanic Center, 67% of Hispanics said they expect their financial circumstances to improve this year, compared to 56% of the general population.

The most telling figure about the Hispanic population remains its soaring buying power.  Hispanics have cut back on their spending in the recession just like every ethnic group.  However, according to Mintel’s research, Hispanic household spending rose 78 percent in 2008 across retail channels, while non-Hispanic household spending only went up 33 percent.  So, even with the cutbacks of the recession, Hispanics remain a powerful market.

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12 Responses to “Hispanics’ Personal Finances And The Recession”

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