Saturday, June 8, 2024

Latinos save less for retirement – part two

Posted by Elena del Valle on September 2, 2009

An expert viewpoint: interview with Xavier Serbia
(Part two of a two part article; part one was published last week)
Click here to read part one of Latinos save less for retirement
By Silvia Pingitore
Journalist, writer and illustrator

Silvia Pingitore, journalist

When and why did you decide to create a financial website in Spanish? Did you realise there was a lack of financial information in this language?

The website was created in 2003. I realized the lack of quality, well-balanced information in Spanish related to personal finance. Not only did I register a lack of personal finance knowledge amongst Hispanics, but also a lack of transparency in the information delivered to the public. The information available was produced by financial companies and/or financial salespeople portrayed as “unbiased and educational” using mainstream media.

In your opinion and personal experience, what are the barriers preventing a real comprehension of the American financial system among Hispanics?

Although we cannot portray Hispanics as one monolithic group, the main barrier is cultural. Not in the sense of taste or refinement but in the sense of a system of beliefs, values and practices, especially with new arrivals. Cultural (all beliefs, values and practices are reinforced between the groups)

1.Mistrust in the banking and commercial system (recurrent run, high inflation, corruption, bureaucracy, lack of or excess of government intervention, etc.)

2.Affinity mentality (seeking services, products, information and guidance within the group, which creates mental barriers between the Hispanic zone and the mainstream zone, just as happened with other immigrant groups at the beginning – Italians, Germans, Jews, Irish, Chinese, etc.)

3.Language barriers

What percentage of these barriers is linguistic?

A significant percentage.

What are the greatest difficulties that you as an expert encounter when explaining financial issues to Hispanics?

The public in general has the same difficulties as any other person dealing with financial issues. You have people with credit issues, debt, housing, retirement, investment, savings and banking, family and money, etc. Of course, some have more complex problems than others. For example: the relationship between money and immigration status which adds to the layers of complexity.

Given that the Latino community has a unique set of issues and cultural concerns related to personal finance, what strategies should the media adopt to focus better on the Hispanic population?

1.Establish a horizontal relationship between advertisers, the media and consumers by:

Educating journalists, editors, producers, hosts and media personnel in finance, economics, statistics, business, financial markets, financial institutions and regulations, and financial journalists and broadcasting.
Creating a code of ethics and conduct with special emphasis on sales financial professionals, but this should not be used to create, produce and deliver financial content.
Implementing these codes.

Establishing a “Chinese wall” between the sales and the editorial department. And within the editorial department distinguishing between reporting (i.e. investigation) and opinions (i.e. commentators).

2.Improving the quality content and separating it into five areas of necessity (minimum): economics, markets, business, personal finance and entrepreneurship. Depending on market demography, some areas should be emphasised more than others.

3.Investing in R&D for money programs, talent and content.

Do you think it imperative that personal finance be taught at schools?

No doubt about it! Not only how to manage money but courses should also be implemented regarding entrepreneurship and innovation.

About retirement: the recent Ariel-Hewitt study “401(k) plan in living color” shows that Hispanics save less than others for retirement. In your opinion and experience, why?

1.Economic reasons  (lack of resources and other priorities)

2.Cultural reasons (values = “it is not one of my priorities”, beliefs = “I don’t need it”, language barriers = “what does that mean?”)

3.Lack of knowledge (understanding the instructions)

4.Living experience (lack of an environment where savings, investments, etc. are talked about and experienced)

How could they be convinced they need to save more?

In this case we need to work first on the concept of  “who” is going to convince them. Some solutions to answer the “who”:

1.Content should be more educational and less sales-pitch-oriented.

2.Technical training to the instructors in personal finance, business, statistics, financial mathematics and economic 101.

Instructors should improve communication and delivery skills

Imagine you have to introduce a company’s retirement plans including 401(k) to a small group of new Hispanic immigrants. What suggestions would you give them?

I would need to know their economic situation first. Sometimes they do not save, not because they do not want to but because they can’t. So this is a major factor. For persons with survival and security needs, it is more important to build an emergency reserve, decrease debt level, work with their insurance portfolio, and improve their skills to increase their income before thinking about retirement. I will motivate people at that stage and teach them the importance of savings. I will use case studies and numbers to show them the benefits, and how they can get there.

Those who are in the accumulative stage are ready to build their nest egg. In this case I will use case studies, describe how the plans work and show the benefits and limitations.

It is important to have information on their economic needs and present situation. How this information is delivered is also very important. It is not just what, but how it is delivered and who delivers it.

Silvia Pingitore is an Italian journalist, writer and illustrator. In 2009 she attended The McGraw-Hill Personal Finance Reporting Program Online Courses for Hispanic Journalists, supported by The International Center for Journalists in Washington.