Why Generational Wealth Matters for Latinos
Latino families have historically faced financial, societal, and even legal barriers that have made building wealth difficult over the years. Studies show that the median wealth of Latino households is significantly lower than that of White households. According to the Federal Reserve, in 2022, the median wealth of Latino families was $48,000, compared to $285,000 for White families.
This wealth gap stems from a mix of systemic barriers, lack of financial education, and limited access to wealth-building tools. However, breaking this cycle is possible through strategic money moves.
1. Shift the Money Mindset: From Surviving to Thriving
Changing things up can be hard sometimes. Believe me, I get it. There is no doubt that financial hardship is real in many Latino families. Often, many Latino families prioritize hard work and saving, but wealth comes from making money work for you through investments, homeownership, and business ownership. And through technology accessible on our phones, it has never been easier to save.
- Financial literacy is key: The more you know about investing, saving, and debt management, the better decisions you can make.
- Shift from just saving to investing (stocks, real estate, and businesses) to grow wealth over time.
- Learn about financial tools like 401(k)s, IRAs and index funds to make the most of your earnings.
2. Own, Don’t Rent: The Role of Homeownership
Real estate has been one of the strongest paths to generational wealth.
- Latino homeownership rates are increasing but still lag behind other groups.
- Buying a home, even a small starter property, allows you to build equity instead of paying rent.
- Look into first-time homebuyer programs that help Latino families qualify for loans with lower down payments. For example, some Latino families can take advantage of VA loans.
3. Invest Early: How to Make Money Work for You
Investing is one of the easiest ways to turn small savings into long-term wealth. Even saving just $50 per month can yield significant returns over time. The important thing is that over time, you develop a mindset to save – and save in a manner that allows your money to work for you.
Example Investment Growth
- If you invest $50 per month in an index fund averaging 7% annual returns, in 20 years, your total investment of $12,000 could grow to $26,046.
- This means you would have more than doubled your money just by consistently investing over time.
Ways to Start Investing:
- Open a Roth IRA or 401(k) if your job offers one.
- Consider using investment apps like Charles Schwab or Vanguard.
- Focus on low-cost index funds to minimize risk.
4. Start a Business: Creating Wealth Beyond a Paycheck
Chances are the if you’re Latino, you or someone in your family has likely started a business. Latino entrepreneurs are growing in number, but many still face funding challenges. Starting a small business—even as a side hustle—can lead to financial independence.
- Think beyond traditional jobs—side hustles like an online store, mobile coffee business, or digital products can bring in extra income.
- Leverage grants and funding opportunities available for Latino entrepreneurs.
- Consider investing $5,000 or less to start a business.
5. Teach Financial Literacy to the Next Generation
Talk to your kids about money. Share what you do at work. Breaking financial cycles starts with education. Teaching kids about money ensures they make better financial choices as adults. Teach them how to spend and how to save – we discuss this in our article, How Latino Parents Can Help Their Kids Learn More About Money.
Tips for Teaching Kids About Money:
- Give them a small allowance to budget and save.
- Encourage them to start an investment account early.
- Show them how to start a side hustle like selling digital products or tutoring.
Best Resources:
- Personal finance books for Latino families
- Podcasts on wealth-building and investing
Start Small. Just Start.
By shifting mindsets, investing, owning property, and teaching financial literacy, Latinos can build generational wealth and close the financial gap.
