Latinas: Hungry for Financial Education, Challenged by Cultural Sterotypes


Research Analyzes Financial Dynamics of Latino Household

DENVER—In general, Latinos have the highest labor participation, the lowest retirement security, a relatively younger age, and a longer life expectancy than any other demographic. Contrary to stereotypes, Latinas long have been the financial managers of their households. But, while white women earn 78 cents for every dollar earned by a white man, Latina women earn just 54 cents. Researchers at the University of Notre Dame, in a study funded by the National Endowment for Financial Education® (NEFE®), say Latinas have a huge appetite for financial education and a strong desire to save, and their savings could provide a critical safety net to America’s largest minority group.

“This study demonstrates that if financial information is communicated simply and respectfully, and in culturally and linguistically competent ways, Latinas, especially, will listen,” says Karen Richman, Ph.D., the Notre Dame study’s principal investigator.

Latinas at Home

Gender dynamics in the traditional Mexican household are more balanced than common perceptions of male-dominated “machismo” culture, according to researchers at the Institute of Latino Studies at the University of Notre Dame. Through data analysis, focus groups and interviews, researchers found that Latinas have long been the administrators of family finances. Mexican-heritage men and women equally are likely to participate in collective financial practices based on “confianza,” or “mutual trust.” Rather than relying solely on individual earnings, the community—including extended family, friends and neighbors—help each other meet financial needs. They share resources through informal lending circles called “tandas.” Men participate in the communal financial system, but women tend to manage these resources.

In recent decades, the traditional idea of marriage built on “respeto,” or “respect,” which demanded female submission to male authority have been replaced with the idea of “matrimonio de confianza,” or “marriage of mutual trust.” In families that migrate to the U.S., Latina women are expected to take larger roles as income contributors and managers of household finances. Migration to the U.S. opens up opportunities for Latina women in education and employment, while diminishing the dominance of men over public and domestic life. Gender dynamics have been shifting in Mexico as well. A large number of older immigrants describe being raised by hard-working single mothers who either left abusive partners or who took over their households when their husbands migrated north. Latino men are embracing gender equality, but they also are more likely to want to return to Mexico, due to a perceived loss of social status in the U.S. Conversely, Latina women are emboldened by the opportunities to make and manage their own money.

Collectivism Protects Against Economic Insecurity, but Is Diminishing

Rather than investing or saving in institutional accounts, many Latinos, especially first- and second-generation immigrants, invest in people—with the expectation of future return—through contributing gifts, services, money and time. Traditionally, this collective financial system has provided a safety net to support the community, including the elderly once they can no longer work. But researchers found that by the third generation, Mexican-heritage immigrants tend to be more individualistic and less likely to participate in the confianza network. Increased income also correlates to less engagement in the collective system.

Latinas at Work

Latinos in general tend to switch jobs more frequently than other demographics, and tend to hold positions that do not provide retirement savings benefits. Latinos who do have employer-sponsored retirement plans are 50 percent more likely than whites to make hardship withdrawals, and Latina women are more likely than Latino men to liquidate pensions with a lump-sum payment or to spend rather than reinvest their savings when they change jobs. Latinas often see retirement accounts as a source of liquidity. They take loans and early withdrawals, often to help others, and they end up paying large penalties.

Despite their desire to save, low earnings mean Latinas have much lower retirement account balances than any comparable demographic. Blacks and Latinos lag 10 percentage points behind whites in their propensity to have a retirement account. Latinas, and many other groups, would benefit from workplace financial education, particularly during job transitions when deciding what to do with retirement accounts.

“Many people don’t know that they can leave money in their 401(k) when they leave a job,” says Richman. “It’s important to validate Latinas’ experiences, and recognize the constraints many are under when making decisions about taking withdrawals and loans from their retirement savings. They are making rational choices given their options,” adds Richman. “They’re not being irrational. They just need better options.”

Read more on the Notre Dame research here.

About the Study

The methodologies used in this study to understand the context and meaning of gender in Latino retirement include statistical analysis of national census data from the Survey of Income and Pension Participation (SIPP) and the Health and Retirement Survey, and a qualitative case study of foreign-born Mexican immigrants’ and native-born Mexican-Americans’ retirement savings in metropolitan Chicago. Research was led by principal investigator Karen Richman, Ph.D., and co-authors Wei Sun, Ph.D., Justin Sena and Sung David Chun, Ph.D.

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