Want to build the wealth of generations? Financial experts say education is key. They added that money shouldn’t be a taboo topic for families of color anymore, so communication is vital, too.
We asked eight Latino financial professionals for their advice on how to grow wealth, talk to kids about finances and start a business — even with high inflation.
Responses have been edited for length and clarity.
Building wealth through investment
The average net worth of a Hispanic household is $36,050, according to the 2019 Financial Consumer Survey, the most recent data available. This is five times less than the average net worth of a non-Hispanic white household, which is $189,100.
To grow your net worth, consider buying assets, paying down debt, building your credit history and credit score and investing in the stock market, Nora DavilaFounder of Inversionista Gal, a Spanish-language financial education platform. You can also invest in your retirement plan, especially if there are tax incentives and your employer offers you a matching company.
Dillian Barrosknown as Delyanne the Money Coach, also recommends Investing in the stock market. She said this is “one of the best ways to build a fortune that changes lives and impacts generations.”
“Many Latinos will focus their efforts on building a business or buying a home, but the stock market is a powerful and passive way to supplement their fortunes. Latinos are incredibly hardworking, and they assume they will keep working indefinitely. But this is actually an expensive gamble.
“Companies can underperform or fail. People can get sick or become disabled. By investing slowly and consistently, Latinos can build a safety net that doesn’t require them to trade more time for money.
“Investing $50 to $100 a month in a simple index fund can create a life-changing fortune for you and your family.”
He said that it takes at least one decade to accumulate wealth, and building the wealth of generations takes longer Yanelli Espinalfinancial educator and creator of MissBeHelpful on YouTube and Instagram.
“For Latin families with average net worth, it would be better to do it ‘poco poco’, or bit by bit, over a long period of time,” she said.
“Examples from my family include Fatah a Conservation investment account To my nephew as a baby and set up an automatic weekly contribution. Just $25 a week for 25 years would be about $112,000. This can be used to finance a down payment on real estate or start a business.”
“My all-time favorite calculation for average income is Ruth Iran, which have no minimum distributions required at any age and are funded with after-tax dollars. This means that a parent can transfer their Roth IRA to a child who is tax-exempt by designating them as a beneficiary! Earned income minors can have a Roth IRA as well.”
Make use of your earning power
Of course, how much you can invest depends a lot on how much you earn.
Janez TorresThe founder of the podcast “Yo Quiero Dinero,” said that if you want to build a fortune and are living off your paycheck, you have to learn how to earn more.
“A lot of what I learned about money growing up revolves around spending less, shopping for sales, and delaying gratification,” she said.
“I would encourage you to find ways to increase your income by switching jobs, hopping between jobs, negotiating your salary, and most importantly, by monetizing your skills outside the corporate job. American government and corporations are not doing enough to close the wage and wealth gap that prevents us from building wealth. We cannot wait for them to prioritize this issue.
“Taking your power of earning into your own hands is a powerful transformation we must make if we are going to make progress as a society. In order to build wealth, we must embody wealth. It starts with investing in the most powerful resource that no one can take from you: knowledge.”
Educate yourself – and your children – about money
Davila, founder of Inversionista Gal, said financial education is vital.
She said that many Latino families don’t like to talk about money and have not historically had access to the tools to build wealth, but it’s time to start talking and learning.
“If you don’t know the difference between an asset and a dilapidated asset, how are you going to buy things to grow your net worth? It is important to know the difference. An asset is something that grows, and debt is something that depreciates.”
Cindy Zuniga Sanchezthe founder of Zero-Based Budget Coaching, is also big on making personal finance a topic at the dinner table.
“The best way to combat the common narrative in societies of color that money conversations are taboo or rude is for parents to talk openly about money with their children,” she said.
“First, teach the kids how to budget or make a plan for their money, such as allowances, cash gifts, and/or money earned from their summer job,” she said.
“Parents can give their children three jars for their money entitled ‘Give, Save and Spend.’ Together, they can decide how to allocate any money received.”
Zuniga-Sanchez also suggests involving children on shopping trips.
“Make trips to the grocery store an educational experience. As you wander the aisles, distinguish between needs and wants, and use the calculator to add totals and identify any coupons or discount opportunities. Allow your child to pay at the register, preferably with cash for a tangible, visible item.”
And it doesn’t matter if you’re not an expert in your finances Carmen Perez, creator of the Make Real Cents personal finance blog. She said you and your child can learn together. “Start financial conversations early and often.”
“Gradually, the complexity of the conversations has to increase, so by the time the child is in high school, they fully understand the concepts of things like the different types of credit, debt, taxes, savings, investment, etc. at a high level. Present these concepts over and over and make them as practical as possible in As early as possible it will help them feel these concepts are tangible and really cling to the child.”
It also suggests parents contribute to 529 children’s college savings accounts and provide inventory instead of a single toy for birthdays or holidays.
Avoid entrepreneurial pitfalls
He said education is essential for new and aspiring entrepreneurs as well Luis Barajasa longtime certified financial planner and author who is also a business director for Latino-owned businesses.
In the past five years, one in 200 Latinos launched a business each month, according to McKinsey’s 2021 report, “The Economic State of Latinos in America.” That’s more than any other racial or ethnic group in the United States
But Barajas said these entrepreneurs should be aware of the pitfalls.
“Just because they have a particular skill or product doesn’t mean they know how to turn it into a business. A business entails more than selling a service or product; it means you need to know human resources, accounting/finance, legal and compliance, etc.”
The second biggest trap new entrepreneurs face is over-excessive self-confidence in the financial sustainability of their new venture.
“The best solution to these two pitfalls is to take business courses through the Small Business Administration or the community school, or read books about small businesses before launching.”
It sure feels good to be excited to start this new business, but remember to think holistically Louis F. RosaCertified financial planner.
“I’ve worked with clients who have done well in their business, but on their personal side, they don’t have a structured budget, fail to invest for their retirement, don’t have life insurance, and even fail to make sure they pay enough assessed taxes to the IRS and/or their state during the year.
Aside from having a bookkeeper or accountant help them with their business, I highly recommend Finding a financial plan To ensure that their personal finances are not neglected.”
“In addition to neglecting their personal finances, small business owners often neglect their personal health and relationships,” Rosa said.
He said he is asking entrepreneurs to download a meditation app and book time in their calendars to exercise and spend time with loved ones.
“Be sure to respect the appointment you set for yourself, just like the appointment you set for your work.”
More about the pros
Barajas is a certified financial planner and author of five books on personal finance and entrepreneurship. He is a member of the National CFP Board and is a financial coach for an upcoming series on PBS called “Opportunity Knocks”. Barajas is also a member of CNBC’s advisory board. He often speaks across the country on issues of overcoming economic inequality. LinkedIn: Luis Barajas, MBA, CEPA, CFP®, EA
Barros is the host of the podcast “Diversity” on CNN. Like many people, she found herself confused and frustrated when it came to money management. She had collected $150,000 in student loan debt and barely understood her 401(k). In 2020, she went debt free and launched Delyanne the Money Coach LLC to help others build a fortune for generations. Instagram: Tweet embed
Davila is the founder of Inversionista Gal, a Spanish-language educational platform to teach others how to become investors and reach financial independence. She is the host of the podcast “Inversionista Gal” and is a certified financial educator. Instagram: Tweet embed
Espinal is the creator of MissBeHelpful on YouTube and Instagram. After paying off $20,000 in credit card debt, she switched to financial education and is now the Director of Education Outreach at NGPF.org, a nonprofit organization that serves high school and middle school teachers. Instagram: Tweet embed
Rosa, a CFP and registered agent, is the creator and host of the “On My Way to Wealth” podcast. He is also the founder of Build a Better Financial Future LLC, a fee-only financial planning and investment management company that works remotely with clients across the country. Instagram: Tweet embed
Perez is the creator of Make Real Cents and the founder of the social budgeting platform Much (usemuch.com). She has a BA in Finance and loves to talk about all things personal finance when she’s not building her company. Instagram: Tweet embed
Torres is the creator and host of the award-winning podcast “Yo Quiero Dinero (I Want Money)”. Each week, she offers personal shame-free, police-friendly, always-on-side financial advice. She is a former engineer who used side business to reach financial independence at the age of 35. Twitter: Tweet embed