In Hartford, all too frequently small business owners in the city’s Hispanic community question why it is easy for them to make deposits in local banks, but getting a loan from these same institutions is very difficult or impossible.
This scenario is not unusual around the state or nationally, says Carmen Sierra, the assistant treasurer for the city of Hartford, who with the city’s treasurer, Adam Cloud, is working to raise the issue of financial literacy for Hispanics and all city residents.
The lack of knowledge of how financial institutions operate and not planning ahead financially is increasingly becoming more of a critical economic issue because, as banks and other financial institutions are maneuvering to tap into the growing economic clout and buying power of Latinos – a market which researchers expect to hit $1.5 trillion this year – many Latinos are not prepared, and often are reluctant, to plunge into the world of credit, consumer banking, retirement savings plans and stocks and mutual funds.
According to several studies, the Hispanic/Latino population, including its growing number of college graduates, generally lags behind other Americans in financial literacy, a situation that largely reflects lack of understanding of U.S. financial institutions, but also an element of distrust.
Part of the problem is that many Hispanic business people are unfamiliar with how to establish and build good credit. However, knowing how to borrow money to expand a business or to obtain a mortgage on home is only part of the financial literacy challenge. Other practices that need to be more widely understood among many Latinos include how to use savings and checking accounts, setting aside funds for retirement, and even how to understand an invoice.
Sierra says there also are nuances in Latino culture that indicate it will take more than bilingual websites, workshops and education campaigns for this population to become fluent in the language of American financial processes and to develop the trust and solid relationships required to connect them with financial institutions. There also is a need for Latinos to modify their behavior and habits.
To convince some Latinos, for example, to use banks may entail what has been described as a leap of faith. A University of Virginia study found that lack of financial understanding and mistrust of banks, often due to problems in the homelands, has resulted in $53 billion that is “unbanked” among Latino households.
Consequently, in setting up community educational financial workshops, for example, the assistant city treasurer explained, consideration has to be given to teaching Latinos how to change some of their financial behaviors as well as to give them the tools to effectively save money.
Moreover, while Latino culture is not monolithic, many share an optimistic vision of the future, especially for their children, exhibit a strong work ethic and family ties, and display a tendency to wait until the necessary money is in hand before making a purchase.
Sierra can point to her own experience in growing up in a Puerto Rican family that came to Connecticut more than 50 years ago. She said her parents never had a savings and checking account, but somehow did save money. In addition, she never saw anything on paper, but there was a sense that there was a family budget. Moreover, she recalled, that they “religiously” made sure to pay their bills on time.
Aware that there are billions of dollars at stake, many financial institutions have begun to pay greater attention to the financial education of Latinos and have developed media campaigns that include Spanish-language television and radio. There are also more bilingual websites, such as those maintained by MassMutual and Equifax.
Financial institutions have also become more open to partnerships with government agencies and non-profit community agencies. Organizations such as AARP, the Hispanic Federation and the Center for Latino Progress also have made Hispanic financial literacy one of their primary objectives.
In Hartford, where about half the population is Latino and Spanish is the primary language in about one-third of the homes, City Treasurer Adam Cloud along with Sierra have been taking an active role in fostering financial literacy among city employees and the city in general, particularly in the minority communities.
This effort includes holding small group meetings with city employees, with bilingual speakers when necessary, and working with various institutions and local non-profit organizations to provide the tools and the knowledge to navigate through what can be perplexing economic challenges.
“We are willing to talk to anybody who wants to be our partner,” Sierra said, adding this includes developing partnerships with unions, schools and social service agencies. Moreover, the office, which oversees assets exceeding a billion dollars in the municipal employee retirement fund, hopes banks and other financial institutions become more responsive to its efforts.
As the city’s assistant treasurer, Sierra has crunched the enrollment numbers in regard to the city’s voluntary 457 deferred compensation plan, which allows city employees to set aside tax-deferred money for retirement. A relatively small percentage of Hispanics were participating, although even at 8 percent Hispanic females were more involved than white females.
In attending voluntary staff workshops about retirement savings, Sierra, who has been assistant treasurer for 3 1/2 years, found that among Hispanics, language was a huge issue. Part of the problem was understanding the terminology and some of the more technical content.
This situation underscores that the best approach, Sierra said, is to conduct small workshops in the community where the content can be tailored to the attendees. While the goal may be to educate Latinos about how to save and other financial options, this needs to be combined with educating how to find institutions they can trust, she said.
Sierra said that the credit unions have, in general, been doing a better job in reaching out to the city’s minority communities than banks. She cited the Hartford Municipal Employees Federal Credit Union as being very cooperative.
When one of the banks in Hartford’s North End closed, Sierra said, Cloud was able to encourage the credit union, within a relatively short time, to open a branch at 2775 Main Street to serve that area. “That’s the type of partnership we will work to continue to develop,” says Sierra.