As America’s Hispanic population grows, the country’s financial well-being will increasingly reflect the financial well-being of Hispanic Americans.

Four unique financial challenges facing Hispanic Americans are critical to understanding our shared future. Experts identified and discussed these challenges at our recent Summit on Hispanic Wealth, cosponsored with the National Association of Hispanic Real Estate Professionals. All the statistics referenced here can be found on the Summit’s presentation slides (PDF).

1. Hispanic families own fewer financial assets than non-Hispanic white families

Though Hispanic households hold comparable amounts of debt with non-Hispanic white families, they have fewer financial assets. “The typical Hispanic or Latino family has about $20,000 in net worth, where non-Hispanic families have a little over $100,000,” according to Lisa Dettling, senior economist at the Board of Governors of the Federal Reserve.

Data from the 2016 Survey of Consumer Finances show that Hispanics are behind most substantially in investments in direct stocks, bonds, and mutual funds and in retirement savings, with just $10,000 in direct stocks, bonds, and mutual funds and $22,000 in retirement savings compared with $60,000 and $65,000, respectively, for non-Hispanics.

2. Young Hispanics are adding to their student loan debt but not to their savings

Since the 2008 recession, the number of Hispanic families holding educational debt increased 5.3 percentage points, with one in five Hispanic households (19.3 percent) holding some college debt in 2016, according to Stephanie Román (PDF), senior policy analyst at UnidosUS. Román compared this with a decline in the average assets held by Hispanic families over the same period, which fell by $27,800.

Abigail Zapote, executive director of Latinos for a Secure Retirement, noted that 83 percent of Hispanic millennials have no retirement savings, compared with 66 percent of non-Hispanic white millennials. The result is a balance sheet that is increasingly lopsided on the liabilities side.

Noerena Limón, senior vice president for public policy and industry relations at the National Association of Hispanic Real Estate Professionals, put this trend into a broader context: “US Latino millennials represent 21 percent of all US millennials.” Fortunately, the median age for Latino millennials is 27, Zapote reminded the audience, which means there is still a lot of time to change course.

3. Financial literacy is exacerbating a history of vulnerability to predatory lending

Gary R. Mottola, research director at the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation, presented findings from the FINRA Foundation’s National Financial Capability Study, which shows Hispanic people trailing non-Hispanic white people in financial literacy, with only 28 percent falling into the category of “high financial literacy” compared with 43 and 38 percent for white and Asian Americans, respectively.

Financial illiteracy, combined with high numbers with limited English proficiency, may leave Hispanic Americans susceptible to predatory lending. Mottola explained that the share of Hispanic people who have used predatory loans in the past five years (such as auto or payday loans) were double that of white people. 

This discrepancy does not seem to be because of a different attitude toward credit risk. “Hispanics are pretty much on par with other races in feeling they have too much debt,” said Mottola, adding that predatory loan use is even higher for Hispanics without English as a primary language.

This problem is also not new, according to Román: “Historically, Latinos have faced challenges in accessing safe and affordable financial products and services.”

4. Hispanics face unique challenges to both short- and long-term savings

On short-term savings, Dettling’s findings show that only 15 percent of Hispanic families have three months of living expenses saved in easily accessible accounts, compared with 42 percent of non-Hispanic families. This leaves Hispanic families vulnerable during emergencies, such as property damage from a natural disaster.

Hispanic Americans also face challenges in retirement savings. “Four out of five Latino households between the ages of 25 and 64 only have $10,000 in retirement savings, compared with one out of two from white households,” said Zapote, pointing to issues of eligibility, with Hispanic workers often taking jobs that fail to provide the work status necessary to qualify for their employer’s retirement plan.

Zapote also noted the role of documentation as a deterrent to long-term savings. “If they lose their status, does that mean they lose their retirement savings?” asked Zapote.

One policy solution: Remove barriers to savings

The panel members stressed the importance of policy interventions for improving Hispanic savings and wealth. For retirement savings, one potential solution raised was independent or state-sponsored retirement accounts. UnidosUS research shows that when Hispanic workers have access to retirement savings plans, they enroll at rates higher than other ethnic groups, the main barrier being eligibility.

To eliminate barriers, states and other municipal governments can establish personalized individual retirement accounts that follow the worker and do not have strict eligibility requirements. California launched a pilot using this model, CalSavers, which will open to everyone in 2019.