Latinos need personal finance education to thrive

Published on Tuesday, 28 October 2008 14:08

DURHAM, N.C. — At approximately 5:30 p.m. at the Latino Community Credit Union in Durham, branch manager, Liliana Concha’s office transforms into a classroom 18 times during the course of the year for financial education workshops.

The Latino Community Credit Union offers more than 10 financial services including savings and checking accounts, remittances, credit cards, mortgage and car loans.  Just as or more importantly, the credit union values financial education for un-banked Latinos in order to help them enter the financial mainstream.  

The LCCU offers three separate sessions during the course of the year that meet each Monday for six weeks for the six classes each session contains.  The credit union offers winter, spring and fall sessions. The classes are available to both LCCU members and non-members alike.

On April 29, four LCCU member students, with a wide young to old age range, sat at a conference table in Concha’s office in the credit union’s downtown Durham location for a workshop on how to buy a home, the last of six in the program.

“I bring lessons I learned from when I bought a house,” said Concha as she prepared to lead class. “Things I wish I knew before but had to learn as I went along.”

The workshops are designed to offer practical financial advice, guidance and know-how of fundamental financial topics to Latinos in the community, most of whom are immigrants. In fact, the four students and two staff members that day had all immigrated to the United States.

The LCCU has more than 50,000 members, 85 percent of whom are first-generation immigrants (65 percent Mexican) and 97 percent of whom are low-income.  

According to a study by the National Council, the largest Latino civil rights and advocacy group in the United States, up to 50 percent of Latinos don’t have a checking or savings account. Foreign born Latinos are even less likely to have a checking or savings account. Some of these members have had negative experiences with financial institutions in their home countries losing all their money after investing with an uninsured institution.

The credit union is attempting to break down this distrustful stigma associated with financial institutions in the Latino community. It offers several different educational services to its members: six workshops classes, a six unit curriculum guide among other resources, credit counseling and a dramatic, feature-length movie detailing how to buy a home in the U.S. as an immigrant.

The workshops and curriculum explore a variety of financial issues. First and foremost, the workshops teach member students the importance of financial institutions and how best to use them.  The LCCU also offers lessons about how to manage a checking account and use an ATM, how to save and create a budget, how to build a credit history, how to buy a car, an introduction to tax, and how to prepare to buy a home. The curriculum was developed with support from the National Endowment for Financial Education.

During the 90-minute class, Concha and the students discussed topics such as identifying what type of house to buy, the importance of location – if it’s near schools or public transportation, remembering to factor in utilities, house inspections, how to deal with an agent and the different types of agents out there. It was all information that directly related to the everyday situations that the students are going through or potentially will be going through.

Getting comfortable

Part of the classroom lessons are packets that contain potential situations the students could encounter, step-by-step instructions, reminders, definitions of important terms and even homework assignments. These packets, coupled with the classroom discussion, allow the students to practice financial situations and ask questions in a comfortable setting.

With only four students and two staff members sitting at the conference room in Concha’s office, the workshop takes on a informal atmosphere. The lessons oftentimes become more of a friendly discussion than any type of lecture. The students always feel comfortable and free to ask questions, even personal questions. The students said that this type of atmosphere was helpful to their learning.

All four students at the “How to Buy a House” workshop had attended all the previous workshops as well, meaning they graduated from the program. In order to graduate from the program, a student must attend all six workshops.

“These are all new things for them, and it’s nice to have someone to explain it in your own language,” Concha said as she translated the class’ sentiments about the workshops. “It’s about getting comfortable.”

Since the credit union’s inception in 2000, more than 9,000 member students have attended the educational workshops, which are available in both English and Spanish. In 2006 alone, more than 3,000 member students participated in the workshop series, and 140 participants graduated from the program.

Unfortunately, these six workshops can’t reach everyone who needs them. LCCU employees frequently take time to educate clients during daily interactions at the bank by talking them through processes or the next step. This type of hands-on learning is necessary in addition to the workshops since many of the credit union’s members have never had a bank account in the country or ever.  

Using an ATM

Credit union employees teach members how to use an ATM, how to complete a withdrawal or deposit ticket, how to withdraw and deposit money into their accounts, how to balance their checkbooks and more. Loan officers at the credit union also take time to teach members what credit is, how to build credit, how to read a credit report, or how to fix a mistake on a credit report.  

Many Latinos hold multiple jobs or have other responsibilities that don’t allow them to get to the branch to take financial education classes. In order to reach more Latinos throughout the community, the LCCU occasionally offers financial education classes outside of the branch locations such as, work sites, churches, etc. This is an effective way to reach more members and non-members, according to the LCCU.

In addition to not being able to reach everyone who needs financial education, the workshops can’t cover all the necessary financial subject matters or provide its participants. The workshops give a good crash course, but they don’t do too much to help its participants plan for the future.

Additional workshops and curriculum lessons are currently being discussed and considered by the credit union. At the moment, the LCCU doesn’t offer a retirement savings or planning workshops. While LCCU Director of Marketing and Communications Angel Romero wouldn’t commit to the inevitability of a retirement workshop, he said the idea has been discussed and considered.

Retirement savings and planning services are not considered to be a priority for the credit union because their members don’t yet see the value in it and have not requested such services.  

One of the reasons for the lack of Latino savings and retirement planning is mistrust in financial institutions due to misconceptions and lack of experience with financial institutions as 70 percent of members are previously un-banked.

The Latino community is not saving for retirement and in general because they aren’t aware of the importance. “No one in their right mind would be that way if they knew the consequences,” said Romero.

According to a 2006 Retirement Services Project study conducted by the National Council of La Raza, 43 percent of Hispanics said they “knew nothing” about saving for retirement compared to 12 percent of other workers.  The report goes on to recommend the government and employers institute “tailored financial counseling strategies” directed toward Latinos. This could include one-on-one financial counseling as well as educational materials and seminars.  

Negative consequences

A lack of a financial education for Latinos could eventually have negative consequences for the population as a whole in North Carolina and on a grander stage, the United States.  

In 2000, the U.S. Census Bureau calculated that North Carolina had the fastest growing Latino population since 1990 as it had grown 394 percent as the Latino population had grown from 1.04 percent of the total population to 4.7 percent in 2000. The U.S. Census Bureau estimates that the Latino population comprised 6.7 percent of the state population in 2006.

This is a part of the national trend. The U.S. Census Bureau estimates Latinos will comprise 15.5 percent of the U.S. population in 2010, or 47.8 million Latinos, and they will comprise 24.4 percent of the U.S. population in 2050, or 102.6 million Latinos.

If the Latino population is not financially knowledgeable, they have the potential to be detrimental to society and the economy. Retired Latinos without retirement savings could become more and more of a burden on society by relying so heavily on Social Security. According to a 2003 AARP study, 76 percent of Latinos 65 years or older rely upon Social Security for more than 50 percent of their income and 38 percent of Latinos rely upon it for their entire income. Without Social Security 33 percent of older Latinos would fall into poverty according to the same source. Twenty-two percent of Latinos aged 65 or older are living in poverty, which is more than twice of the general population 65 years or older.

The system would be strained to support that type of need in the future. The AARP and U.S. Census Bureau predict that in 2010 Latinos will make up 7.2 percent of all people aged 65 or older, and by 2050 they will make up 17.5 percent of the same population.

The number of older Latinos needing financial assistance in the future will only magnify the disturbing over dependence the older Latino community already has upon Social Security in order to stay out of poverty. Their dependence will also put lots of strain on a Social Security system that does not need any additional burden.

This puts the importance of financial education for the Latino community into the context of its implications on the U.S. population in general now and in the future.  

The financial education workshops offered by the LCCU provide the base for the financial literacy Latinos will need to be successful now and into the future, but even more and further reaching education may be needed.

The 2006 Retirement Services Project study conducted by the NCLR recommends more support from policymakers for financial education for Latinos. The report suggests offering employers financial incentives through tax credits for providing its employees with an independent (to avoid conflicts of interest) financial counselor once a year from a list of financial counselors certified by the Department of Labor. The report also suggests providing grants for community tax preparation sites so low-income families can get tax, savings and investment advice to help prepare for retirement.

These ideas may or may not be potential solutions to getting the Latino community access to more financial instruction, but it seems a more comprehensive and wider-reaching financial curriculum for Latinos is needed for the future.

Chris Kostyla graduated from the School of Journalism and Mass Communication in May 2008.

NCLR study

AARP study