Editor’s Note: In celebration of Hispanic Heritage Month, we’re posting a series of articles on some of the financial challenges Hispanics face. You can also read our previous stories on buying your first casita, saving for una buena jubilación and financing your negocio. Come back to Ask Experian anytime for information that can help everyone achieve their financial goals.
Next time you are at the dinner table with la familia, consider discussing personal finance topics such as budgeting, saving and investing. While culturally it may not be something you are used to, doing so will benefit the next generation tremendously. And we all want to create a better life for our hijos.
Why is this so important? A 2015 report among 1,500 college-educated Hispanics found just 12% demonstrated advanced financial knowledge and only 32% were financially literate. According to a recent study from the GenForward project at University of Chicago, Latinos ages 18-34 are less likely to have established financial tools like bank accounts and credit cards. Many also have no retirement savings.
It is not surprising that many young adults are not financially savvy considering personal finance is not typically taught in schools. Therefore, if you do not teach your children at home they will grow into adulthood without any knowledge about how to manage their money. And it’s never too early to start—a study by two Cambridge University professors revealed that kids’ money habits are formed by age seven.
How Do You Start the Conversation?
For hijitos, check out some parenting magazines and blogs for tips and activities. For example, around age two or three start to show them currency and the differences between each coin and bill.
As they grow older, you can start to give children an allowance and teach them about saving and spending. You can even open up a bank account for them and make trips to the bank to deposit and withdraw funds. Later, consider adding them to one of your credit cards as an authorized user so they can start to understand credit but you can closely monitor their spending.
You can also co-sign for their own credit card once they are responsible enough to manage credit on their own. There are a few card options such as Discover it chrome for Students and Capital One Journey Student Credit Card especially for teenagers and college students, which charge no annual fee. Also, there are secured cards where you can limit the amount of money your child can spend by putting down a deposit of money to secure the line of credit, which often matches the amount of the deposit.
Resources Can Help
If you feel like you need a little more ayuda, there is a bilingual book “¿Se Habla Dinero? The Everyday Guide to Financial Success” by Lynn Jimenez, a business reporter for KGO Radio 810 in San Francisco.
In the introduction Jimenez states “…you can use this book to help your children learn about money so they can survive financially. It is designed to encourage conversations about money between generations…It will help you teach your children good financial habits.”
This book can be a useful tool to help guide you on what financial topics to discuss and how to explain them to your child or teenager.
There are also community programs you may be able to tap into. The Council for Economic Education is an organization that focuses on the economic and financial education of students from kindergarten through high school and has a program for Hispanic students and their families. To find if there is a program in your area, go here.
Teaching the next generation about money may also help their confidence and outlook. According to a survey by Wells Fargo while Hispanic millennials are facing more fiscal challenges than other groups, they have optimism about their financial futures with 63% saying they will fare better than their parents. The more your children know, the more they will feel empowered about how to handle their finances and manage it wisely. As they progress in their careers and earning potential, they will have a solid financial foundation that will set them up for success for the rest of their lives.