Do you want to build generational wealth? Education is key, say financial experts. Money should no longer be a taboo subject for black families, they add, so communication is vital too.
We asked eight Latin financial professionals for their advice on how to increase wealth, talk to children about finances and start a business, even in a context of rising inflation.
The answers have been modified 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 available data. That’s five times less than the average net worth of a non-Hispanic white family, which is $ 189,100.
To increase your net worth, consider buying assets, paying off debts, building your credit history and credit score, and investing in the stock market, he said. Nora Davila, 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 business match.
Delyanne Barrosalso known as Delyanne the Money Coach, also advises invest in the stock market. This is “one of the best ways to create generational and life-changing wealth,” she said.
“Many Latins 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. Latins are incredibly hardworking and assume they will continue to work indefinitely. But it’s actually a pretty expensive bet.
“Companies can underperform or fail. People can get sick or become disabled. By investing slowly and consistently, Latin Americans 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 a decade to accumulate wealth and building generational wealth takes longer, he said Yanely Espinalfinancial educator and creator of MissBeHelpful on YouTube and Instagram.
“For Latino families with an average net worth, it will be better to do it ‘little by little’, or little by little, over a long period of time,” he said.
“Examples from my own family include opening a custodial investment account for my nephew as a newborn and setting up an automatic weekly contribution. Just $ 25 a week for 25 years will be around $ 112,000. This can be used to finance a down payment on real estate or start a business. “
“My all-time favorite account for middle income earners is the Roth IRA, which has no required minimum distributions at any age and is funded with after-tax dollars. This means that a parent can transfer their Roth IRA account to a tax-exempt child by naming him as a beneficiary! Minors with earned income may also have a Roth IRA custodial account.
Leverage your earning power
Of course, how much you can invest depends a lot on how much you earn.
Jannese Torresthe founder of the “Yo Quiero Dinero” podcast said that if you want to build wealth and live on pay after pay, you have to learn how to earn more.
“Much of what I learned about money as I grew up revolved around cutting back, buying on sale and delaying gratification,” he said.
“I would encourage you to find ways to increase your income by changing careers, changing jobs, negotiating your salary, and most importantly, monetizing your skills outside of a corporate job. The US government and corporations are not doing enough to close the wage and wealth gap that prevents us from creating 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 change we must make if we are to make progress as a community. To build wealth, we must embody wealth. This begins with investing in the most powerful resource that no one can ever take away from you: knowledge.
Educate yourself and your kids about money
Financial education is vital, said Dávila, the founder of Inversionista Gal.
Many Latin families don’t like to talk about money and historically haven’t had access to the tools needed to build wealth, he 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-Sanchezthe founder of Zero-Based Budget Coaching, he is also great at making personal finance a table topic.
“The best way to combat the common narrative prevalent in communities of color that conversations about money are taboo or rude is for parents to talk openly about money with their children,” he said.
“First, it teaches children how to budget or plan for their money, such as allowances, cash gifts and / or money earned from their summer job,” she said.
“Parents can give their children three jars for their money labeled as giving, saving and spending. Together, they can determine how to allocate the funds they receive. “
Zuniga-Sanchez also suggests involving children in shopping trips.
“Make supermarket trips a learning experience. As you walk through the aisles, distinguish between needs and wants, use a calculator to add up the totals and identify any coupons or discount opportunities. Allow your child to pay at the checkout, preferably in cash for a tangible and visual element.
And it doesn’t matter if you’re not an expert with your finances, he said Carmen Perez, the creator of the personal finance blog Make Real Cents. You and your son can learn together, he said. “Start money conversations early and often.”
“Gradually, the conversations must grow in complexity, so when the child goes to high school, he thoroughly understands the concepts of things like different types of credit, debt, taxes, savings, investments, and so on at a high level. these concepts over and over and making them as practical as possible as soon as possible will help them feel tangible and be truly faithful to a child. “
He also suggests that parents contribute to 529 college savings accounts for children and give stock instead of a toy for birthdays or holidays.
Avoid entrepreneurial pitfalls
Education is also needed for new and aspiring entrepreneurs, he said Luigi Barajasa longtime financial planner and certified author who is also a business manager for Latin-owned companies.
In the past five years, 1 in 200 Latin Americans have started a business each month, according to a 2021 McKinsey report, “The Economic Status of Latinos in America.” This is more than any other racial or ethnic group in the United States
But those entrepreneurs should be aware of the pitfalls, Barajas said.
“Just because they have a special skill or product doesn’t mean they know how to turn it into a business. An activity involves more than just selling a service or product; it means you need to know HR, accounting / finance, laws and compliance, etc. “she said.
“The second biggest trap new entrepreneurs face is excessive exuberance and self-confidence in the financial sustainability of their new venture.
“The best solution for these two pitfalls is to take business courses through the Small Business Administration or local community school or read books about small businesses before they launch.”
And it’s certainly nice to get excited about starting that new business, but remember to think holistically, she said Luis F. Rosaa certified financial planner.
“I have worked with clients who were doing great in their business, but personally they don’t have a structured budget, they don’t invest for retirement, they don’t have life insurance and they don’t even make sure they are paying adequate estimated taxes. ‘IRS and / or their status during the year.
“In addition to having an accountant or bookkeeper to help them with their business, I highly recommend him find a financial planner to ensure that their personal finances are not neglected ”.
“In addition to neglecting their personal finances, small business owners often neglect their personal health and relationships as well,” Rosa said.
He said he tells business owners to download a meditation app and block time on their exercise calendars and spend time with loved ones.
“Make sure you respect the appointment you made for yourself as much as you would with an appointment you made for your business.”
Learn more about the pros
Barajas is a certified financial planner and 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 a member of the CNBC Advisory Council. He often speaks across the country on issues related to overcoming economic disparity. LinkedIn: Louis Barajas, MBA, CEPA, CFP®, EA
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 accumulated $ 150,000 in student loan debt and barely understood her 401 (k) of her. In 2020, she became debt free and launched Delyanne the Money Coach LLC to help others build generational wealth. Instagram: @delyannethemoneycoach
Dávila is the founder of Inversionista Gal, an educational platform in Spanish to teach others how to become an investor and achieve financial independence. She is the host of the “Inversionist Gal” podcast and is a certified financial educator instructor. Instagram: @Inversionista_gal
Espinal is the creator of MissBeHelpful on YouTube and Instagram. After settling $ 20,000 in credit card debt, she moved on to financial education and is now the director of education at NGPF.org, a nonprofit that serves high and middle school teachers. Instagram: @MissBeHelpful
Rosa, a CFP and registered agent, is the creator and host of the “On My Way to Wealth” podcast. She is also the founder of Build a Better Financial Future LLC, a paid financial planning and investment management company that works 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). He has a degree in finance and loves to talk about everything related to personal finance when he is not working to build his own company. Instagram: @makerealcents
Torres is the creator and host of the award-winning podcast “Yo Quiero Dinero (I Want Money).” Each week, he offers shameless, POC-friendly personal finance advice, always served with a cheeky side. She is a former engineer who used the secondary hustle and bustle to achieve financial independence at the age of 35. Twitter: @DineroPodcast