Want to build generational wealth? Education is key, financial experts say. Money should no longer be a taboo topic for families of color, he says, so communication is key, too.
We asked eight Latino financial professionals for their advice on how to grow wealth, talk to kids about finances and start a business — even in the midst of rising inflation.
Responses have been edited for length and clarity.
build wealth by investing
The average net worth of a Hispanic household is $36,050, according to the 2019 Consumer Finance Survey, the latest data available. This is less than five times the median net worth of a non-Hispanic white family, which is $189,100.
To increase your net worth, consider buying property, paying off debt, building your credit history and credit score, and investing in the stock market. Nora Davila, founder of Invernista Gal, a Spanish-language financial education platform. You can also invest in your retirement plan, especially if there are tax incentives and your employer offers a company match.
deline barrosalso known as Delaine the Money Coach, also recommends investing in stock market, It is “one of the best ways to create a life-changing and generational wealth,” she said.
“Many Latinos will focus their efforts on building a business or buying a home, but the stock market is a powerful and passive way to supplement their wealth. Latinos are working incredibly hard, and they believe that they will be able to do so indefinitely. Will continue to work until now. But it’s actually quite an expensive gamble.
“Businesses can perform poorly or fail. People can get sick or become disabled. By investing slowly and steadily, Latinos can create a safety net that requires them to trade more time for money. is not required.
“Investing just $50 to $100 a month in a simple index fund can create a life-changing asset for you and your family.”
Wealth takes at least a decade to build up, and generational wealth takes longer to build, said yaneli espinalA financial educator and creator of MissBeHelpful on YouTube and Instagram.
“For Latino families with average net worth, over the long term it would be best to do it ‘poco a poco,’ or little by little,” she said.
“Examples from my own family include an opening custodial investment account For my nephew as an infant and setting up an automatic weekly contribution. Only $25 per week for 25 years would be about $112,000. It can be used to make a down payment on real estate or to start a business. ,
“My absolute favorite for average income earners is Roth IRA, which has no minimum required distributions at any age and is funded with after-tax dollars. This means a parent can register their Roth IRA account as a beneficiary tax-free! Minors with earned income can also have a custodial Roth IRA account.”
Take advantage of your earning power
Of course, how much you can invest depends on how much you earn.
janese torresThe founder of the “Yo Quiero Dinero” podcast said that if you want to build wealth and you’re living paycheck to paycheck, you have to learn how to earn more.
“Everything I learned about growing money revolved around cutting back, buying on sale, and delaying gratification,” she said.
“I encourage you to find ways to increase your income by changing careers, quitting jobs, negotiating your salary, and most importantly, monetizing your skills outside of the corporate job. Government and Corporate America look to pay and money.” Not doing enough to bridge the gap that is preventing us from building wealth. And we can’t wait for them to prioritize this issue,” she said.
“Taking our earning power into our own hands is a powerful change we must make to progress as a community. To create wealth, we must hold onto wealth. It starts with investing in the most powerful resource no one can ever take from you: knowledge.”
Educate yourself – and your kids – about money
Financial education is important, said Davila, founder of InvestorGall.
That said, many Latino families do not like to talk about money and have historically not had access to the tools needed to create wealth, but it is time to start talking and learning.
“If you don’t know the difference between an asset and a depreciating asset, how would you buy things to increase your net worth? Knowing the difference is important. An asset is something that grows, and a debt is something that grows.” that depreciates.”
Cindy Zuniga-SanchezThe founder of Xero-Based Budget Coaching is also big on making personal finance a dinner-table topic.
“The best way to counter the prevalent common narrative in communities of color that money talks are taboo or uncivilized is for parents to openly talk about money with their children,” she said.
“First, teach kids to budget or plan for their money, such as allowances, monetary gifts and/or money earned from their summer job,” she said.
“Parents can give their kids three jars to label their give, save and spend money. Together, they can determine how to allocate any funds received.”
Zuniga-Sanchez also suggests including the kids on shopping trips.
“Make grocery store trips a learning experience. As you walk through the aisles, distinguishing between needs and wants, use the calculator to add up the totals and identify any coupons or opportunities for discounts. Allow your child to pay at the register, preferably with cash for a tangible and visible element.”
And it doesn’t matter if you’re not an expert in your own finances, said carmen perez, creator of the Make Real Saints personal finance blog. You and your child can learn together, she said. “Start money talks early and often.”
“Gradually, the conversations need to grow in complexity, so by the time a child is in high school, they’ll be able to master the concepts of things like different types of credit, loans, taxes, savings, investments, etc., at a higher level.” Introducing these concepts over and over and getting them practical as soon as possible will help them feel tangible and really stay with a child.”
She also suggests that parents contribute to 529 college savings accounts for kids and stock in place of a toy for birthdays or holidays.
Avoid the pitfalls of entrepreneurship
Education is also necessary for new and aspiring entrepreneurs, said louis barjasoA longtime certified financial planner and author who is also a business manager for Latino-owned businesses.
According to the 2021 McKinsey report, “The Economic Situation of Latinos in America,” over the past five years, 1 in 200 Latinos have started a business each month. This is more than any other racial or ethnic group in the US.
But those entrepreneurs should be aware of the pitfalls, Barajas said.
“Just because they have a particular skill or product doesn’t mean they know how to turn it into a business. A business requires more than just selling a service or product; it means you have to. Need to know HR, Accounts/Finance, Legal and Compliance etc,” he said.
“The second biggest trap facing new entrepreneurs is over-enthusiasm and confidence in the financial stability of their new venture.
“The best solution for these two traps is to take business courses through the Small Business Administration or local community school or read books on small business before launching.”
And it’s certainly okay to be excited about starting that new business, but remember to think holistically, that said. Louis F. rosaA certified financial planner.
“I’ve worked with clients who were doing great in their business, yet on their personal side, didn’t have a structured budget, failed to invest for their retirement, didn’t have life insurance and even —that also fail to ensure that they are paying sufficient estimated taxes to the IRS and/or their state during the year.
“Apart from having an accountant or bookkeeper who helps them with their business, I highly recommend finding a financial planner To ensure that their personal finances are not neglected.”
“In addition to neglecting their personal finances, often small business owners also neglect their personal health and relationships,” Rosa said.
He said he tells entrepreneurs to download a meditation app and put time on their calendar to exercise and spend time with loved ones.
“Be sure to respect an appointment you made for yourself as much as you would respect an appointment you made for your business.”
More about professionals
Barajas is a certified financial planner and author of five books on personal finance and entrepreneurship. He is on the national CFP board and is a financial coach for an upcoming series on PBS called “Opportunity Knock”. Barajas is also on the advisory council of CNBC. He often speaks on issues of overcoming economic inequality across the country. LinkedIn: Louis Barajas, MBA, CEPA, CFP®, EA
Barros is the host of the “Variety” podcast on CNN. Like many people, he found himself confused and frustrated when it came to managing money. She had racked up $150,000 of student loan debt and barely understood her 401(k). In 2020, she went debt-free and launched Delaine The Money Coach LLC to help others build generational wealth. Instagram: @delyannethemoneycoach
Davila is the founder of Inversanista Gal, an educational platform in Spanish that teaches others how to become an investor and reach financial independence. She is the host of the podcast “Inversionista Gal” and is a certified financial educator instructor. Instagram: @Investor_gal
Espinal is the creator of MissBeHelpful on YouTube and Instagram. After paying off $20,000 of credit card debt, she entered financial education and is now the director of educational outreach at NGPF.org, a nonprofit serving high school and middle school teachers. Instagram: @MisbyHelpful
Rosa, a CFP and enrolled agent, is the producer and host of the “On My Way to Wealth” podcast. He is also the founder of Build a Better Financial Future LLC, a fee-only financial planning and investment management firm working remotely with clients across the country. Instagram: @luis_f_rosa
Perez is the creator of Make Real Cents and the founder of the social budgeting platform Much (usemuch.com). She has a bachelor’s degree in finance and when she’s not working on building her own company, she loves to talk about personal finance. Instagram: @makerealcents
Torres is the creator and host of the award-winning podcast “Yo Quiero Dinero (I Want Money)”. Each week, she gives shame-free, PoC-friendly personal finance advice, always served with mother-in-law. He is a former engineer who used the side hustle to reach financial independence at the age of 35. Twitter: @MoneyPodcast