|
FINANCIAL EDUCATION FOR MINORITIES
All Americans are in need of financial literacy and financial
planning. But minorities are seemingly in particular need of the
information, knowledge and skills required to navigate what is
increasingly becoming a complex financial services market.
Consider, for instance, the following:
- "Recent research
indicates that Hispanics and African-Americans lag the
general population in saving for retirement," reports Investing
for Success, an investor-education partnership formed by
the National Urban League, Hispanic College Fund, and the
Investment Company Institute Education Foundation in 2000.
"Surveys also show that African Americans and Hispanics
place a high priority on saving for their children's
education and their own retirements; however, many feel they
lack the knowledge to invest to achieve those goals. And
knowledge makes a big difference. Among both Hispanic and
African-American working households, those who are
knowledgeable about investing are far more likely to save
for retirement."
- Financial planning is a
high priority for African-Americans according to the 2004
FPA Attitudes and Impressions of Financial Planning Survey.
Some 56 percent of African-Americans surveyed say financial
planning is a high priority as compared to 39 percent for
all Americans surveyed. Yet, just 20 percent of
African-Americans have a financial planner vs. 27 percent
for the population at large.
So what is being done or what can be done to deliver
financial education and financial planning education to
minorities? The Financial Literacy & Education Commission
outlined the steps in its 2006 National Strategy for Financial
Literacy report. Improving financial literacy among all
Americans requires:
- An increased public
awareness of the issues as well as the resources available.
One Web site that acts as a clearinghouse for financial literacy
materials is MyMoney.gov.
- Developing tailored,
targeted materials and dissemination strategies. The report
says that improving the financial literacy of Americans in
not a "one-size-fits-all" approach. People learn
in different ways and that tailored material is especially
important to reaching key demographics, especially
populations without a traditional banking relationship,
multicultural and multilingual communities. In fact, the
report notes that financial issues and education vary across
cultures and acquiring an understanding of these differences
is critical to increasing the role of minority markets in
areas such as transaction accounts and home ownership.
"For some, there is a lack of trust of banks and
government agencies. Others have varying attitudes toward
spending and savings, and may use intra-cultural financial
mechanisms such as peer-lending and investing groups within
their communities. And still others must adhere to religious
restrictions. And some communities, such as Native American
reservations and ethnically concentrated neighborhoods, may
not have a lot of financial institutions. Often, community
organizations can play an important role in delivering
financial education as well as promoting
homeownership.
- Tapping into public-private
and private-private partnerships is an essential part of
delivering financial education and financial planning to
minorities. Often partnerships can help increase awareness
of and use of homeownership, bank accounts, and wealth
building.
For those referred to as "the unbanked," experts
say many banking products are not well-designed to meet the
needs of low-income immigrants — the largest group likely to be
among those individuals considered to be unbanked. Often, they
turn to alternative financial services, such as wire transfer
companies and currency exchanges, to send money to relatives
because they may not view U.S. banks as providers of similar
services. What's more, monthly fees and minimum balances may
inhibit or otherwise preclude low-income individuals,
particularly immigrants, from opening checking accounts, in
addition to mortgage products with down payment requirements.
The report suggests that the best way to deliver
financial help to this group is through
industry-driven financial products and services. For example,
remittance programs to send money to native countries, branch
offices with special services, "starter" checking
accounts, fixed-value contribution accounts, deposit-secured
loans, secured credit cards for those with no credit history,
and employer payroll debit/ATM cards may, depending on how these
plans are structured, serve as good introductory services for
this group.
However, the report also notes some of the strides being made
to help serve minority communities. The FDIC is collaborating
with public- and private sector organizations to promote Money
Smart and the range of financial education resources and
services it provides. Learn more
at www.fdic.gov/consumers/consumer/moneysmart.
The FDIC has partnered with the IRS to link Voluntary Income
Tax Assistance (VITA) sites to Money Smart Model Sites, where
financial education is taught on a regular basis and generates
active participants. According to the report, these partnerships
work together to increase awareness among low-income consumers
about eligibility for tax credits such as the Earned Income Tax
Credit (EITC). VITA sites also offer free tax help to eligible
wage earners and help consumers obtain applicable tax credits.
For multilingual and multicultural populations, there is a
great need to deliver financial education. For instance, the
2006 Report says a high percentage of Mexican, Latin Americans,
Asian, and European immigrants do not, for instance, hold
transaction accounts. And minority populations are not buying
homes at rates similar to other groups. This is partly due to
the fact that minorities who live in remote communities have
limited access to financial products, but mostly due to cultural
differences — some minorities doubt the possibility of
homeownership. But steps can be taken to encourage homeownership
and reduce the distrust of banks and government agencies. The
report, for instance, suggests that institutions help minorities
better understand financial systems, improve access to financial
services and work to change perceptions about the accessibility
of home ownership.
May 2006 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
|
