Latinos Make Financial Progress, But Discrimination Persists

A recent study finds the financial capability of Latinos improved over the last decade, but obstacles to Latino wealth remain. In February 2023, the U.S. Financial Industry Regulatory Authority (FINRA) Foundation published new findings in a study titled “A Closer Look at Financial Capability of Hispanic Adults in the United States.”

Several FINRA surveys contributed to the 2023 FINRA study, and the most recent of those surveys was fielded in 2021 to a nationally represented sample of the diverse U.S. Latino population. It showed more Latinos are saving and investing, but experiences vary greatly by race, gender, income and education.

Financial capability improvements

From 2009 to 2021, the number of Latinos reporting that they had set aside some amount of emergency savings nearly doubled, from 29% in 2009 to 48% in 2021. On the whole, Latino adults reported they were “better able to manage everyday money matters” and experienced less “financial fragility” in 2021 compared to 2009. The study also identified an increase in Latino investment account ownership from 24% in 2012 to 30% in 2021.

What’s behind Latino financial gains

While the progress sounds encouraging, a closer look shows a complex and not-so-rosy situation.

First, the study attributes some of the financial gains by Latinos to broader trends in the financial sector, and not necessarily gains specific to the Latino community. Since 2009, it’s become easier for people with varying budgets to open an investment account and trade, especially with the creation of fractional shares and zero-commission trading.

FINRA Foundation senior researcher and study author Olivia Valdes suggests the Latino progress between 2009 and 2021 is consistent with that of the general U.S. population. Valdes attributes some of this trend to the year the study started.

“When we first started collecting this data, it was in 2009 right after the Great Recession. It was a low point in financial capability in general,” says Valdes. “As the economy has improved, it makes sense that things have looked better.” She says that's been the case in general, including for other racial and ethnic groups.

The reality is the wealth gap between Latino and non-Latino households remains stark. According to the U.S. Census Bureau, the median net worth of Latino households in 2020 was $52,190, compared with $195,600 for non-Latino households.

Latinos lack access to retirement accounts

Latinos are more likely to face barriers to retirement benefits, too. The FINRA study found that in 2012, only 48% of Latinos owned a retirement plan, and that percentage grew only a small amount — to 51% — by 2021. The gap is even greater for Latinos without a college degree. The study found that 75% of Latino college graduates owned a retirement account compared to 42% of those with lower levels of education.

The study’s authors partly attribute low rates to a lack of access, since “some estimates find that only half of Hispanic workers have access to employer-sponsored retirement plans." FINRA referenced a 2018 study by UnidosUS titled “Latinos’ Retirement Insecurity in the United States,” which also drew its information from the U.S. Census. It found Latinos face “access and eligibility hurdles” to employer-sponsored retirement and showed nearly 75% of white workers have a job that sponsors a retirement plan, compared with only 53% of Latinos.

Race, gender and discrimination

The FINRA survey revealed important differences in financial experiences by race, gender, income, education and age:

• Latinas reported greater “financial fragility” and “difficulty paying expenses” than Latino men. 

• Latinos without a college degree and/or with incomes below $50,000 reported more “difficulty paying expenses” and “financial fragility” than those with a college degree or earning more than $50,000.

• Black Latinos and lower-income Latinos were more likely to use high-cost borrowing services than non-Black and higher-income Latinos.

The experiences Latinos face likely influence their financial lives and choices. Even if Black and brown investors have similar goals as white investors, they likely face a different path to getting there, says Omari Hall, a financial counselor and diversity leader at Greenpath Financial Wellness in Detroit.

Hall points to how discriminatory experiences and barriers to access have led to a lack of trust in the financial system.

"Most financial services systems do not account for the entry point that many Black and brown folks are starting from in order to get to those goals,” says Hall.

Research by the U.S. Census Bureau also suggests discrimination could be a factor in these gaps. Its study on wealth disparity within the Latino community identified “disparities in well-being and wealth among Hispanic origin groups.” It found that barriers to refugee and asylum laws, knowledge of English, and racial discrimination contribute to well-being and wealth variation between Latino groups.

These findings are consistent with previous research on experiences of discrimination. In 2021, a study by the Pew Research Center found: “No matter their skin color and despite the notable gap, Latinos are experiencing discrimination.”

Around half of Latino adults reported experiences of discrimination in the year prior to the Pew study, such as: being told to go back to their country, being criticized for speaking Spanish, or being regarded as stupid. Latinos with darker skin color reported experiencing more discrimination (64%) than Latinos with lighter skin color (54%).

The FINRA study concludes that financial education is one solution to improving financial capability.

But discrimination still impacts Latino financial health. Latinos make less on average and have fewer paths to financial support at their disposal compared with non-Latino households. Until these gaps are closed, financial health trends for Latinos (and others) will continue to be underwhelming.