How Hispanic Women Navigate Cultural Barriers to Build Generational Wealth

Family is the driving force for many Hispanic women in their generational wealth-building era. They want to invest in their children’s and grandchildren’s futures to provide them with financial stability and better educational opportunities. But, getting there is challenged by racial wealth gaps and cultural barriers. The Hispanic racial wealth gap continues to widen, leaving women and their families more financially vulnerable and with fewer opportunities. By the first quarter of 2024, Hispanic families had only 19 cents for every dollar [1] that white families had, meaning that, on average, they were $1.1 million behind.

Hispanic women, both in and outside the U.S., are working hard to break cultural barriers that have been passed down from generations or those beyond their control. How can we help them move forward and build generational wealth when challenged by income disparities, family responsibilities, limited financial literacy, and restricted access to financial services? By creating awareness. In this blog, we take a closer look at the impact these challenges have on Hispanic women’s financial well-being and provide practical strategies to overcome them.

The Hispanic Wealth Gap

How much do Hispanics contribute to the U.S. economy? Hispanics contribute $3.2 trillion [2] to the nation’s gross domestic product per a 2023 report. This means that Hispanics are shaping the future of the U.S. economy by growing in number, joining the workforce, and getting more education. However, these factors disproportionately affect them, contributing to the Hispanic wealth gap in America:

Gender wage gap: Hispanic women make 57 cents for every dollar earned by non-Hispanic white men. [3]
Lower College Completion Rates. Hispanic women continue to fall behind in earning college degrees.
Lower Homeownership Rates: Hispanic women are less likely to own homes, which are important assets for building wealth.
Workplace Discrimination: Hispanic women face both gender and racial biases in hiring, promotions, and compensation.
Retirement Savings and Investment: Given their longer life expectancy, Hispanic women need to save more for retirement to keep up with the financial expenses throughout their extended lifespan.

Cultural Barriers to Hispanic Women’s Wealth Success

The Money Talk Taboo

One of the major cultural challenges hindering generational wealth in Hispanic communities is the lack of open conversations about money. Talking about financial matters– income, investing, savings, or debt– is often considered taboo. If you’re not talking about it, you’re not learning how to manage it, plan for the future, or pass down knowledge that could help build wealth across generations.

So why the resistance against money talk in Hispanic households? Because it can be considered disrespectful to talk about debt.[4] Opening the money conversation might feel like you’re prying or pushing others (especially elders) to share personal details they’d rather keep private, causing family tension. This dynamic limits access to financial knowledge and opportunities to build wealth that could benefit future generations, especially girls.

Mistrust of financial institutions

While swiping a credit card or making digital payments has become increasingly common amongst Hispanic women, about 9.3% of Hispanic households in the U.S. were unbanked in 2021 [5], according to the FDIC. Not having a bank account makes it harder for Hispanic women to learn about important financial products and services, which are key to achieving financial independence.

So where does the mistrust of financial institutions come from? From financial crises in Latin American countries. Historical events such as the Mexican Peso Crisis [6], the Argentine Great Depression [7], or the Venezuelan Banking Crises [8] have led to the devaluation of the currency, governments freezing bank accounts, the collapse of multiple banks, loss of hard-earned savings, hyperinflation, and interest rates.

So what’s a financial method that’s simple, easy to manage, and tangible? Cash-based transactions– a common practice in Latin American countries. But, the preference for tangible resources over financial tools is a barrier to Hispanic women building generational wealth. It keeps them from building credit to purchase a home, missing out on investment returns from diversified portfolios, or taking advantage of the power of compound interest.

Machismo and Gender Roles

Machismo is a social behavior pattern that focuses on the man protecting the honor and welfare of their family. However, it puts women at a disadvantage by reinforcing traditional gender roles where the man is the dominant partner. So when it’s time to make a financial decision, the man will leave the woman out of the conversation and insist on taking full control.

This dynamic is passed down through Latin American generations, where the woman has little to no say in budgeting, investing, or saving because the man believes she cannot handle financial matters. This pushes the woman to take on traditional gender roles, such as caring for the home and the family, restricting her ability to pursue professional opportunities and reach financial independence.

Family and Caregiving Responsibilities

Many Hispanic women take on the role of primary caregivers, often not by choice but due to cultural expectations. They care for their children, elderly family members, and loved ones, taking a toll on their emotional and mental well-being [9]. In the U.S., the caregiver burden is high and demanding, with more than half (53%) of Hispanic women [10] caring for both an elderly family member and a child under 18 at the same time. To be primary caregivers, they have to take career breaks, reduce work hours, or stop working. While some women are able to divide their efforts between working and caregiving, part-time jobs typically offer lower pay and fewer benefits. This affects their ability to build wealth as they can no longer contribute to retirement plans or reach their savings goals.

Financial literacy and education barriers

Making educated decisions about your money is the most important way to generate wealth. Unfortunately, language barriers and complicated financial terminology are critical barriers keeping Hispanic women from taking charge of their financial futures. A 2018 TIAA study found only 12% of Hispanics had good financial knowledge [11]. Hispanic women scored even lower than men, showing that the gap in building wealth is getting wider. This highlights the urgent need for financial resources that are both culturally relevant and language-appropriate.

Financial literacy should start with our youngest crowd in schools. However, in Hispanic communities, financial literacy is underrepresented in school curriculums and not always available. Despite this barrier, young U.S.-born Hispanics know more about money than foreign-born Hispanics.

Strategies to Build Generational Wealth

Creating generational wealth starts with one risk-taker. Hispanic women are becoming trailblazers in their families, breaking out of gender norms and cultural barriers to take their families one step closer to financial independence.

Start with education

Do you have 30 minutes to spare while you’re taking care of household responsibilities or going for a walk? Listen to a financial education podcast made just for you [12]. These episodes are jam-packed with resources from women who have been in your zapatos and who understand the challenges of creating wealth while doing life. Also, look into financial literacy programs such as the Hispanic Wealth Project [13]. This initiative connects you with programs that boost your financial expertise while providing you with practical tools that open doors to wealth-building opportunities for you and future generations. Also, dive into our Savvy Ladies’ blogs to figure out which investing or retirement strategy is best for you and make a visit to the Savvy Ladies Free Financial Helpline to be connected with a trusted pro bono advisor for quality guidance.

Set clear and achievable goals.

Knowledge without action is like buying a really expensive tool but never putting it to use. Define your short and long-term goals. Then, break down larger goals into small and achievable steps. Let’s say that your next short-term goal in your financial journey is to open a high-yield savings account. You know, the type of savings account that gives you higher interest rates than regular savings accounts? Start with a small portion of your income (5%) and gradually increase your contributions over time.

Pro tip: Automate your finances as much as possible! Set up automatic transfers so that you can focus on other aspects of your daily life without neglecting your finances.

Create a budget that meets your needs.

Budgeting can look different for everybody, depending on your financial situation, financial needs, priorities, and goals. Perhaps you’re a single mom who is financially responsible for your children while supporting family members in your home country. Or you just took a pay cut at your primary job, and now you’re on the hunt for extra income to make ends meet. What’s important is to pick a budgeting method and stick with it. If it doesn’t work, then move on to another strategy. If you are ready to start budgeting but don’t know how, read this article for easy budgeting tips and answers to common questions Hispanic women ask on our free helpline.

Prioritize saving and investing.

Turning your high-yield savings account into an emergency fund is a great way to optimize your savings by earning more interest while keeping your money accessible for unexpected expenses– medical emergencies, car repairs, home repairs, or funeral costs. Your best ally to investing is time due to the power of compound interest. Therefore, start investing as early as possible. A great way to begin investing is with index funds. They’re a solid choice for building wealth because they track 500 of the largest and most stable companies instead of depending on just one, making them less risky and better for long-term growth. Index funds also have lower fees and provide consistent returns.

Important investing tip: Make sure to go into your investment accounts and actually purchase your investments– index funds, stocks, bonds, EFTs, etc. Don’t let your hard-earned money sit in a cash account, as your money will not grow!

Explore homeownership options.

Purchasing a home is one of the most common ways to build generational wealth. While skyrocketing home prices plus income-based struggles continue to increase, the homeownership rate among Hispanics rose to 49.5 percent in 2023 [14]. These are great news among the least affordable housing markets so far. There aren’t specific loan programs tailored to Hispanic homeowners; however, the following are government loans that Hispanic women and their families could look into:

VA loans: VA loans support veterans, active-duty, reserve service members, and their spouses to buy, build, or improve a home. Their incentives include no down payment, competitive interest rates, and flexible credit requirements.
FHA loans: The Federal Housing Association helps low-income and first-time buyers qualify for a mortgage. Their incentives include low down payment, flexible credit requirements, and higher debt-to-income ratios.
USDA loans: The U.S. Department of Agriculture helps individuals with low-to-moderate income buy homes in eligible rural and suburban areas. Their incentives include no down payment, low mortgage insurance costs, affordable monthly payments, and income-based eligibility.

Plan for retirement.

The best thing you can do for your future is to plan for retirement now. If you’re employed, you have access to a retirement account known as a 401(k). In it, you can choose investments such as stocks, bonds, mutual funds, index funds, ETFs, etc. The great thing about this account is that your employer will match your contributions. Let’s say you contribute 5% of your salary, and your employer offers a 5% match. This means that they will also contribute an additional 5%, doubling the amount going into your retirement account. Basically, it’s free money!

If your budget allows it, you can also open an Individual Retirement Account (IRA) that offers tax-advantaged savings. This is a retirement account that you open on your own and contribute independently, where your savings grow either tax-deferred (Traditional IRA) or tax-free (Roth IRA).

Recently, the FIRE (Financial Independence, Retire Early) movement has become increasingly popular due to people wanting to reach financial freedom earlier in life. Curious to hear more about a group of Latina financial experts who are paving the way to financial independence? Take a look at this video. [15]

Start a side hustle or a small business.

One of the fastest-growing groups of entrepreneurs in the U.S. is Hispanic women. They’re successful at offering digital solutions to tech startups, creating unique traditional recipes in the food and beverage industry, contributing to male-dominated fields such as STEM, and offering bilingual services in the law, accounting, and consulting space. To truly build generational wealth, focus on these:

Reinvest your business income instead of using the earnings to make unnecessary purchases or fund a luxurious lifestyle.
Diversify your business by expanding your product, opening new locations, or creating a subscription-based product that generates passive income.
Build a strong credit history.
Tap into these funding resources [16] for Hispanic women entrepreneurs.
Explore alternate options such as crowdfunding or microloans for entrepreneurs in underserved communities.
Network with other successful Hispanic women entrepreneurs through organizations such as the United States Hispanic Chamber of Commerce or Latinas in Business.

Empowering the Next Generation

Empowering young minds to take control of their financial futures is fundamental to building generational wealth. While financial literacy is not taught in schools (yet), you have the power and privilege to be your child’s first money teacher. This is what 4 out of 5 surveyed American parents wish they had more of [17]– more money talks, more guidance on budgeting, saving, investing, and more opportunities to set their children up for success. Avoiding open conversations about money creates discomfort around the topic and reinforces the taboo that is often present in Hispanic households. Want to know more about how to teach children about financial literacy? Take a look at our blog about 5 ways to teach children about money.

Conclusion

Building generational wealth is a long-term plan that requires strategy, financial education, and discipline. Creating an inclusive environment for Hispanic women to thrive financially takes having uncomfortable money conversations, addressing systemic issues, and educating the next generation of girls about financial literacy and opportunities. While significant strides have been made to move forward and build wealth, continuous efforts are needed to overcome the cultural barriers that Hispanic women face.