Want to build generational wealth? Education is key, financial experts say. Money shouldn’t be a taboo topic for families of color anymore, they add, so communication is vital, too.
We asked eight Latino financial professionals for their advice on how to grow wealth, talk to children about finances and start a business — even amid rising inflation.
Responses have been edited for length and clarity.
Build wealth by investing
The median net worth of a Hispanic family is $36,050, according to the 2019 Survey of Consumer Finances, the latest data available. That’s five times less than the median net worth of a non-Hispanic white household, which is $189,100.
To grow your net worth, consider buying assets, paying off debts, building your credit history and credit score and investing in the stock market, said Nora Dávila, founder of Inversionista 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.
Delyanne Barros, known as Delyanne the Money Coach, also recommends investing in the stock market. That’s “one of the best ways to build 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 incredibly hard-working, and they assume that they will continue to work indefinitely. But that is actually quite an expensive gamble.
“Businesses can underperform or fail. People can get sick or become disabled. By investing slowly and consistently, Latinos can build a safety net that doesn’t require them to trade more time for money.
“Investing just $50 to $100 a month in a simple index fund can create life-changing wealth for you and your family.”
It takes at least one decade to accrue wealth, and building generational wealth takes longer, said Yanely Espinal, a financial educator and the creator of MissBeHelpful on YouTube and Instagram.
“For Latino families with an average amount of net worth, it will be best to do it ‘poco a poco,’ or little by little, over a long period of time,” she said.
“Examples from my own family include opening a custodial investment account for my nephew as an infant and setting up an automatic weekly contribution. Just $25 per week for 25 years will be about $112,000. This can be used to fund a down payment on real estate or start a business.”
“My absolute favorite account for average income earners is the Roth IRA, which has no minimum required distributions at any age and is funded with after-tax dollars. This means a parent can pass down their Roth IRA account to a child tax-free by naming them as the beneficiary! Minors with earned income can have a custodial Roth IRA account as well.”
Leverage your earning power
Of course, how much you can invest depends a lot on how much you earn.
Jannese Torres, the 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.
“Much of what I learned about money growing up revolved around cutting back, shopping on sale and delaying gratification,” she said.
“I would encourage you to find ways to increase your income by switching careers, job-hopping, negotiating your salary and, most importantly, by monetizing your skills outside of a corporate job. The government and corporate America isn’t doing enough to bridge the wage and wealth gap that is keeping us from building wealth. And we cannot afford to wait for them to prioritize this issue,” she said.
“Taking your earning power into your own hands is a powerful shift that we must make if we are going to make progress as a community. In order to build wealth, we must embody wealth. That starts with investing in the most powerful resource that no one can ever take from you: knowledge.”
Educate yourself — and your kids — about money
Financial education is vital, said Dávila, the Inversionista Gal founder.
Many Latino families don’t like to talk about money and historically haven’t had access to the tools needed to build wealth, she said, but it’s time to start talking and learning.
“If you don’t know the difference between an asset and a depreciating asset, how are you going to buy things to grow your net worth? It is important to know the difference. An asset is something that grows, and debt is something that depreciates.”
Cindy Zuniga-Sanchez, the founder of Zero-Based Budget Coaching, is also big on making personal finance a dinner-table topic.
“The best way to combat the common narrative prevalent in communities of color that money conversations are taboo or rude is for parents to openly talk about money with their children,” she said.
“First, teach children how to budget or make a plan for their money, such as allowance, monetary gifts and/or money earned from their summer job,” she said.
“Parents can give their children three jars for their money labeled give, save and spend. Together, they can determine how to allocate any funds received.”
Zuniga-Sanchez also suggests involving children in shopping trips.
“Make trips to the grocery store a learning experience. As you walk through the aisles, distinguish between needs and wants, use a calculator to add up totals and identify any coupons or opportunities for discounts. Allow your child to pay at the register, preferably with cash for a tangible and visual element.”
And it doesn’t matter if you’re not an expert with your own finances, said Carmen Perez, the creator of the Make Real Cents personal finance blog. You and your child can learn together, she said. “Start money conversations early and often.”
“Gradually, the conversations need to grow in complexity, so by the time the child is in high school, they thoroughly understand the concepts of things like the different types of credit, debt, taxes, savings, investing and so on at a high level. Introducing these concepts over and over again and making them as practical as possible as early as possible will help them feel tangible and really stick with a child.”
She also suggests parents contribute to 529 college savings accounts for children and give stock in place of one toy for birthdays or holidays.
Avoid entrepreneurial pitfalls
Education is necessary for new and aspiring entrepreneurs, too, said Louis Barajas, a longtime certified financial planner and author who’s also a business manager for Latino-owned businesses.
In the past five years, 1 in 200 Latinos have launched a business each month, according to a 2021 McKinsey report, “The economic state of Latinos in America.” That’s more than any other racial or ethnic group in the U.S.
But those entrepreneurs should be aware of pitfalls, Barajas said.
“Just because they have a special skill or product doesn’t mean that they know how to turn it into a business. A business entails more than selling a service or a product; it means that you need to know human resources, accounting/finances, legal and compliance, etc.,” he said.
“The second biggest trap that new entrepreneurs face is over-exuberance and self-confidence in the financial sustainability of their new enterprise.
“The best solution for these two traps is taking business courses through the Small Business Administration or local community school or reading books on small business before they launch.”
And it’s certainly fine to get excited about starting that new business, but remember to think holistically, said Luis F. Rosa, a certified financial planner.
Luis F. Rosa
“I have worked with clients that were doing great in their business, yet on their personal side, they don’t have a structured budget, fail to invest for their retirement, don’t have life insurance and even fail to ensure they are paying adequate estimated taxes to the IRS and/or their state during the year.
“Aside from having an accountant or bookkeeper that helps them on their business, I highly recommend finding a financial planner to ensure that their personal finances do not get neglected.”
“In addition to neglecting their personal finances, oftentimes small-business owners also neglect their personal health and relationships,” Rosa said.
He said he tells entrepreneurs to download a meditation app and block out time on their calendars for exercise and spending time with loved ones.
“Make sure to respect the appointment you made for yourself, just as much as you would an appointment you made for your business.”
More about the pros
Louis Barajas: Certified financial planner
Barajas is the 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 Knocks.” Barajas is also on CNBC’s Advisor Council. He frequently speaks across the country on issues of overcoming economic disparity. louisbarajas.com
Delyanne Barros: Delyanne the Money Coach
Barros is the host of the “Diversifying” podcast on CNN. Like many people, she found herself 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 became debt-free and launched Delyanne the Money Coach LLC to help others build generational wealth. Instagram: @delyannethemoneycoach
Nora Dávila: Inversionista Gal
Dávila is the founder of Inversionista Gal, an educational platform in Spanish to teach others how to become investors and reach financial independence. She is the host of the “Inversionista Gal” podcast and is a certified financial educator instructor. Instagram: @Inversionista_gal
Yanely Espinal: MissBeHelpful
Espinal is the creator of MissBeHelpful on YouTube and Instagram. After paying off $20,000 of credit card debt, she pivoted into financial education and is now the director of educational outreach at NGPF.org, a nonprofit serving high school and middle school teachers. Instagram: @MissBeHelpful
Luis F. Rosa: On My Way to Wealth
Rosa, a certified financial planner and enrolled agent, is the creator and host of the “On My Way to Wealth” podcast. He’s 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
Carmen Perez: Make Real Cents
Perez is the creator of Make Real Cents and is the founder of the social budgeting platform Much (usemuch.com). She has a bachelor’s degree in finance and loves to talk about all things personal finance when she isn’t working on building her company. Instagram: @makerealcents
Jannese Torres: Yo Quiero Dinero
Torres is the creator and host of the award-winning podcast “Yo Quiero Dinero (I Want Money).” Each week, she dishes out shame-free, POC-friendly personal finance advice, always served with a side of sass. She’s a former engineer who used side hustles to reach financial independence at age 35. Twitter: @DineroPodcast
Cindy Zuniga-Sanchez: Zero-Based Budget Coaching
Zuniga-Sanchez is the founder of Zero-Based Budget Coaching LLC and author of the upcoming book “Overcoming Debt, Achieving Financial Freedom: 8 Pillars to Build Wealth.” She has spoken to thousands and coached hundreds on creating a realistic money plan to achieve financial freedom. Instagram: @zerobasedbudget.