Language is constantly evolving. Reflecting the fluidity of labels used in the Latino community, the following terms are used interchangeably: Latino and Hispanic. This report uses the term “Hispanic” if it appears in a referenced data source.
The Latino community is not a monolith. Accordingly, Latino wealth should be examined from all angles, taking into consideration Latinos’ differentiating factors, such as racial diversity, immigration status, migration timing, geography, generational differences, lived experiences, and how these factors correlate with wealth-building.
This report is divided into two parts and begins by examining differences in Latino wealth by geographical region, focusing on assets and debt in six states: Illinois, California, Florida, North Carolina, Texas, and New York. In the second part, Latinos from lower-wealth backgrounds describe their lived experiences, particularly around wealth-building barriers and aspirations, to illuminate potential policy directions. Future reports in Brookings’s Latino wealth series will focus on the other critical differentiators.
Part 1: Examining Latino wealth in six states provides insight into regional differences in economic security and mobility for Latinos
- Wealth disparities between Latino and white households are partly driven by differences in asset ownership, which vary by state. New York has the largest Latino-white wealth gap, with white households holding 40 times the wealth of Latino households. Illinois has the smallest Latino-white wealth gap, with white households holding 1.9 times the wealth of Latino households. In Texas, white households have three times the wealth of Latino households; in North Carolina, 3.6 times; in Florida, five times; and in California, nine times.
- The regional differences between Latino wealth and assets highlight how Latinos are not monolithic. For example, Latinos’ median household net worth in Illinois is $158,800—significantly higher than in the other five states we examined. Latinos have median net worth of $75,600 in Texas; $55,900 in North Carolina; $54,200 in Florida; $52,700 in California; and $5,900 in New York.
- There are a variety of people- and place-based factors that could explain regional differences between Latinos. The net worth, asset, and debt differences among Latinos from these six states reflect a range of people- and place-based factors that could explain these variances. Example factors include national origin; the length of time they have been in the United States; their immigration or citizenship status; the initial socioeconomic status of migrant groups upon entry into the U.S., particularly pre-immigration financial and human capital; and the public policies, including state and local ones, that impacted wealth creation for these groups across time and place.
- Examining how credit and debt impact Latinos is key to understanding Latino wealth. Often, when discussing wealth, the focus is on assets—but liabilities (or debt) make up the other half of the equation. More data and research are needed to understand how debt affects Latino households.
Part 2: Community conversations highlight Latinos’ lived experiences, including wealth-building barriers and aspirations
- Community conversation participants emphasized the need for economic stability before economic mobility. Many Latinos we spoke to had economic aspirations such as building wealth, but were not yet ready to focus on these goals because they were mostly concerned with necessities such as rent, food, and utilities. As a result of income and job instability, many also said they held more than one part-time job to ensure consistent hours of pay. They also highlighted important gender-related disparities related to family care responsibilities.
- Participants had limited credit options and preferred to avoid debt. The most common types of debt participants reported included credit card debt, car debt, and medical debt. When faced with a financial emergency, many sought a loan from family or friends; if this wasn’t available, they relied on credit cards. Critically, when examining loan and credit products, interest rates were very important to many participants, who sought products that offered lower interest rates and timelier loans.
- Community conversations show how retirement and intergenerational wealth transfers are connected. Though many participants aspired to plan for their retirement, some were unable to due to their focus on day-to-day expenses, while some relied on their children for support. Relatedly, many participants noted reverse transfers of wealth and resources between children and parents, in which children supported parents for both daily expenses and retirement.
- Community conversations informed important policy directions. For example, to address wealth disparities, all levels of government should pursue policies that help families or individuals build assets, increase human capital, reduce or eliminate debt, transfer intergenerational wealth, access financial information networks, and achieve income and job stability.
- Both parts of this report highlight areas for future research. These included further examining home equity and home debt as well as intergenerational wealth transfers.
Part 1: Examining Latino wealth in six states provides insight into regional differences in economic security and mobility for Latinos
To understand Latinos’ economic position in the United States, one can examine their wealth, which paints a holistic picture of a family’s economic security and prospects for upward mobility. As research points out, it is a family’s wealth—not just income—that allows them to make a down payment on a home, pay for their children’s college education, or start a business with seed capital. Wealth also provides families and individuals with the ability to weather financial storms, including recessions.
In the simplest terms, wealth is what you own minus what you owe. Wealth is sometimes referred to as “net worth,” and is measured by considering the difference between assets and liabilities. Assets can include savings and checking accounts, stocks, retirement accounts, business equity, vehicles, and homes and other real estate. Liabilities can include credit card debt, medical debt, student loan debt, mortgages, auto loans, and family loans.
Though Latinos have been one of the fastest-growing demographic groups in the United States for decades, Latino wealth—as well as the underlying causes of the wealth gap between Latino and white families—is often misunderstood or understudied. Moreover, because Latinos are extremely diverse, research and policy work must address the wide range of starting points and lived experiences Latinos possess and how these differentiators correlate with wealth-building. Among these are Latinos’ racial diversity, immigration status, socioeconomic status upon entry into the U.S., generational distinctions, and even regional differences.
While Brookings Metro will address the other differentiators in future reports, this report’s first part emphasizes the importance of examining geography and regional differences among Latinos to better understand Latino wealth. We spotlight Latino wealth, assets, and debt across six states using data from the 2021 Survey of Income and Program Participation (SIPP). Five of the six states—Illinois, California, Texas, Florida, and New York—were chosen to feature different geographic locales where Latinos have traditionally lived for generations and continue to see their population increase. The sixth state, North Carolina, was chosen to spotlight an area with a fast-growing Latino population.
Using the 2021 SIPP, the report demonstrates the net worth differences between Latino and white households and presents detailed information of a few asset and debt types.1 However, given the limitations of sample size by racial and ethnic group, not every asset or debt type is listed, so they will not add up to a household’s entire net worth. A more detailed explanation of the data and analysis can be found in the methodology section.
We also include comparisons between Latinos across states to showcase the diversity of assets and debt. In doing so, we highlight how regional differences—though only one factor—matter when examining Latino wealth.
Wealth disparities between Latino and white households are partly driven by differences in asset ownership and vary by state
According to the 2021 SIPP, across all six states we examined, wealth disparities between Latino and white households are partly driven by differences in asset ownership. This is because larger shares of white households tend to hold more assets, and the median value of those assets are higher for white households than for Latino households.
For example, in Illinois, Latinos lag in median net worth and in all asset types compared to white households—both in the percent holding assets and the median value of those assets (Table 1). Indeed, white households in Illinois hold nearly double (1.9 times) the wealth of Latino households in the state.
However, in Illinois, the largest gaps are evident when examining the median value of assets between Latino and white households. For instance, the median value of assets at financial institutions is $25,000 for white households, compared to $10,000 for Latino households. And the median value of white households’ retirement accounts is $138,000, compared to $84,800 for Latino households.
With a concerted policy approach, it may be possible to close Illinois’ gap between Latino and white households in two areas: the percent of households holding assets at financial institutions and in retirement accounts. Compared to the percent of white households that own assets at financial institutions (96%), Latinos (92.3%) only lag by about 4% (nationally, this gap is about 7%). When it comes to the percentage of households that have a retirement account of some kind, Latinos (57.1%) lag behind white households (66%) by only 9% (nationally, this gap is about 23%).
The Latino-white wealth gap is more pronounced in California, with white households holding about nine times the median wealth of a typical Latino family (Table 2). Significant differences in asset ownership—rather than debt—drive some of the wealth disparities between Latino and white households in this state.
For example, a smaller share of California Latino households holds retirement accounts, assets at financial institutions, and equity in their homes compared to white households. Forty-one percent of the state’s Latino households hold retirement accounts, compared to 68.3% of white households; 84.9% of Latinos hold assets at financial institutions, compared to 96.6% of white households; and 39.7% of Latinos hold equity in their own homes, compared to 58.4% of white households.
Moreover, the median value of California Latino households’ retirement accounts, equity in their homes, and assets at financial institutions is also significantly less than that of white households. The median value of Latinos’ retirement accounts in California stands at $30,000, compared to $115,000 for white households. The median value of equity that California Latinos own in their home is around $330,000, compared to $450,000 for white households. And the median value of white households’ assets at financial institutions ($26,700) is 4.5 times that of Latino households ($6,000).
In Florida, white households have about five times the median wealth of a typical Latino family (Table 3). A larger share of white households holds assets, across all asset types, than Latino households. The median value of white households’ assets is also significantly higher than that of Latino households. For example, the median value of white households’ assets at financial institutions ($13,400) is more than three times that of Latino households ($4,000). Meanwhile the median value of white households’ retirement accounts ($118,000) is 4.5 times that of Latino households ($26,000).
In North Carolina, the wealth held by white households ($201,600) is about 3.6 times the wealth of Latino households ($55,900) (Table 4). And, as in other states, disparities exist between white and Latino households in terms of ownership and value of all asset types. However, retirement accounts and financial institution assets are two areas that stand out as potential focal points for building Latino wealth in North Carolina.
The share of Latinos holding assets at financial institutions (79.3%) is significantly smaller than white households (96%), as is the median value of those assets: $3,000 for Latino households and $14,000 for white households. Likewise, the share of Latino households holding retirement accounts (28.1%) is much smaller than that of white households (58.2%). At the same time, the median value of white households’ retirement accounts ($120,000) is about 17 times greater than that of Latino households ($7,000).
Across the six states in this report, Latinos in Texas have the second-highest median net worth ($74,600). Still, white households in the state have three times the wealth of Latinos. This is due to two factors. First, a larger share of white households in Texas holds assets, across all asset types, compared to Latino households (Table 5). Second, the median value of white households’ assets, across all asset types, is higher than that of Latino households.
However, one area worth exploring further in Texas is Latinos’ home equity. While the share of Latinos owing equity in their homes (62.3%) is not much different than the share of white households (67.7%), the median value of their home equity varies significantly. The median value of white households’ home equity is $180,000, compared to $100,000 for Latino households.
Finally, nowhere is the Latino-white wealth gap starker than in the state of New York. White households there hold 40 times the wealth of a typical Latino household (Table 6). This is best explained by the significantly smaller percentage of Latino households holding any type of assets compared to the share of white households, who hold an array of assets.
However, it is interesting to note that while a very small share of Latinos in New York own equity in their own home, of those that do, the median value of this asset is very high ($300,000) compared to white households ($175,000).
The regional differences between Latino wealth, assets, and debt highlight how Latinos are not monolithic
In the figure below, one can compare asset types between Latinos in different states. A few observations stand out.
First, the median net worth of Latino households in Illinois ($158,800) is significantly higher compared to Latinos in the other five states examined (Table 7). Some of these differences could be attributed to different asset ownership patterns among Latinos across states. For example, a larger percentage of Latino households in Illinois have a retirement account of some kind, assets at financial institutions, and equity in a vehicle compared to Latinos in other states. About 54% of Illinois Latino households own equity in their own residence—second only to Latinos in Texas, which has the highest share of Latinos who own equity in their homes, at (62.3%) (Table 8). The median value of these various asset types is also higher for Latino households in Illinois compared to Latinos in other states.
Latinos’ ability to build wealth in Illinois may be attributed to homeownership opportunities and settlement patterns in the state, particularly in the suburbs. For example, research by the Latino Policy Forum found that more than 50% of Illinois’ Latino population lives in the suburbs. Additionally, 47% of Latino households in the suburbs earn more than $75,000, and 60% of Latinos living in suburbs own their homes.
Nevertheless, in general, this Illinois data raises important questions for policymakers and community advocates in the state. What is Illinois doing right? And what lessons can be shared with other states seeking to build Latino wealth?
Second, in North Carolina, a smaller share (28.7%) of Latinos holds retirement accounts than Latinos in the other five states (Table 8). The median value of North Carolina Latinos’ retirement accounts ($7,000) is also significantly smaller than that of Latinos in the other five states. Moreover, the share of Latinos in North Carolina that hold assets in financial institutions (79.3%) is only slightly higher than that of New York Latinos (79%), but it is less than that of Latinos in the other four states. And the median value of North Carolina Latinos’ assets in financial institutions ($3,000) falls behind that of Latinos in the other five states. Given this data, policies aimed at increasing the share of Latinos holding retirement accounts and assets at financial institutions may be an important priority for state policymakers, enabling North Carolina Latinos to keep pace with Latinos in other states.
Finally, a smaller percentage of Latinos in New York hold equity in their own home, retirement accounts, and assets at financial institutions than Latinos in the other five states. Plenty of reports have highlighted the tremendous income and wealth inequality in the state, and that is also reflected in the experiences of the Latino population. Part of why Latinos in New York hold less wealth than Latinos in other states may be due to the lack of homeownership opportunities, particularly in New York City, where most Latinos reside.
There are a variety of people- and place-based factors that could explain regional differences between Latinos
The net worth, asset, and debt differences among Latinos from these six states reflect a range of people- and place-based factors that could explain these variances. Example factors include Latinos’ national origin; the length of time they have been in the United States; their immigration or citizenship status; the initial socioeconomic status of migrant groups upon entry into the U.S., particularly pre-immigration financial and human capital; and the public policies and market circumstances that impacted wealth creation for these groups across time and place.
Among the states examined, for instance, the national origin groups of the Latino populations varied significantly, and other research has shown how wealth disparities exist across different Latino-origin groups. In Illinois, Mexicans make up 79% of the Latino population, while Puerto Ricans consist of 9%, South Americans 4%, and Guatemalans 2%. Since 2000, however, Venezuelans have been the fastest-growing Latino group in Illinois. Meanwhile, in Florida, though Cubans are the largest Latino group, the state also has sizeable Puerto Rican and Colombian populations.
If one is examining states by the number of Latinos rather than share, it is worth noting that California has the largest number of Mexican (12.2 million), Salvadoran (732,000), and Guatemalan (455,000) populations. Texas has the largest Honduran population (169,000), though Mexicans are the state’s largest Latino group (9,031,000), making up 78.9% of the Latino population.
In addition to national origin, there are other factors to consider when examining wealth and wealth disparities, including racial makeup. In New York, Puerto Ricans (1,001,000) are the largest Latino ethnic group, followed by Dominicans (867,000). Importantly, the Afro-Latino community generally lives along the Atlantic coast and in major East Coast cities, including New York City. In light of the stark wealth disparities in New York, it is necessary to consider the structural disadvantages that Afro-Latinos face. For example, research shows that despite their higher educational attainment and participation in the labor market, Afro-Latinos experience anti-Blackness in the economy and society, which impacts household incomes and homeownership.
Also important are place-based factors, such as state and local policies that create wealth-building barriers or opportunities. Is it difficult to buy a home in the state? Do lower-income families have access to special tax credits? Do they have social safety net policies that support immigrants of all immigration statuses? Importantly, the way that different Latino origin groups were and are treated in the U.S. varies by time, region of settlement, and how state and local laws are administered. A forthcoming Brookings Metro report on Latino history at the intersection of public policy will highlight this important state and local context, as well as provide a better understanding of Latino national origin groups’ distinct experiences of emigration to and reception in the United States.
Finally, these state-based considerations become important for places such as North Carolina, which is not necessarily viewed as a traditional Latino hub but has a fast-growing Latino population. North Carolina has seen a greater than 1,300% increase in its Latino population between 1990 and 2020. Mexicans are largest Latino group in North Carolina (50%), though the Central American population (18%) has grown rapidly, while Puerto Ricans make up 12%. With a Latino population of more than 1 million, the state can also be seen as a barometer of contemporary immigration policy debates, especially as they are unfolding in the southeastern parts of the U.S. (Even as 68% of Latinos in North Carolina were citizens in 2021.) Moreover, a robust and growing network of Latino leaders and Latino-led organizations and businesses in the state plays an important role in advocating for and achieving Latino economic, civic, and representative equity.
Examining how credit and debt impact Latinos is key to understanding Latino wealth
Two important aspects of wealth deserve special attention: debt and credit. Often when discussing wealth, the focus is on assets—but liabilities (or debt) make up the other half of the equation. Debt is what you owe, while credit is what you can borrow. Yet as scholars such as Abbye Atkinson have noted, debt and credit are “intimately entangled compliments,” even as laws and elected officials aim to bifurcate the topics.
For Latinos, debt and credit complicates the wealth story, as more data and research are needed to understand how they affect Latino households. Debt backed by collateral is referred to as “secured debt,” while debt without collateral is referred to as “unsecured debt.” In these categories, secured debt includes mortgages and home equity loans, as well as debt secured against vehicles and businesses. Unsecured debt, on the other hand, entails credit card debt, student loans, medical debt, and private debts.
For example, though Latinos in Illinois have the highest net worth across Latinos in all six states examined, they also have the most secured and unsecured debt (Table 7). Thus, one strategy for Latinos in Illinois to reach parity in net worth with white households may be to bolster policies that enable them to reduce debt. Meanwhile, Latinos in New York have the least amount of both secured and unsecured debt when compared to Latino households in the other states, but they also have lower asset holdings.2
However, in addition to understanding secured versus unsecured debt, it is important to note that there is a difference between “good debt” and “bad debt,” and there are also positive and negative aspects of borrowing money. How an individual experiences debt will vary based on their social and economic context. For example, personal debt does not necessarily indicate economic hardship, and in some cases, can be viewed as a mechanism for wealth creation (though usually only for households with pre-existing wealth).
Debt that helps build wealth or improves financial prospects is good debt (e.g., mortgage loans). Bad debt, on the other hand, does not improve one’s financial outlook and can also harm one’s credit or deplete one’s finances (e.g., payday loans).
Unfortunately, not everyone has access to “good” forms of debt, and there are also many racialized dimensions of debt. Scholars such as Louise Seamster find that “good debt” correlates highly with “white debt,” while “bad debt” correlates highly with “Black debt”—especially as white families tend to have more “good debt” than Black and Latino families. Meanwhile, Black and Latino people are more likely than white people to depend on “bad debt,” including alternative financial services such as payday loans and title loans, because there are fewer banks in Black and Latino neighborhoods. Given the racial diversity among Latinos, it is worth further exploring how structural advantages or disadvantages may lead Latinos generally—and Afro-Latinos in particular—to encounter “good debt” versus “bad debt.”
Aside from different types of debt products, there are also different terms (such as discriminatory interest rates and financing costs) and disparate returns on the same products for different groups. As Atkinson explains, marginalized groups are more likely to “struggle and fail disproportionately in the consumer credit market for reasons that have more to do with entrenched racism, sexism, and the like, and less to do with profligacy or lack of personal responsibility. Moreover, the consequences of their failure are similarly magnified for those same reasons.” As an example, consider a Latino family who takes out a mortgage loan with the expectation that their home will increase in value over time (the return on their debt). Yet, despite their expectations, it is possible that their homes may not appreciate in value due to biased appraisals, which have been shown to undervalue homes owned by Black and Latino homeowners. As a result, Latino families can receive lower returns on loans than white families due to circumstances beyond their control.
Part 2: Community conversations highlight Latinos’ lived experiences, including wealth-building barriers and aspirations
In this report’s second part, we spotlight the lived experiences of Latinos from lower-wealth backgrounds as they share their wealth-building barriers and aspirations, to illuminate potential policy directions. We held 13 community conversations in English and Spanish between April 2023 and August 2023, with a total of 107 participants. We would like to acknowledge our contributing partners who helped set up these conversations: East Coast Migrant Head Start Project, La Luz Center, Prospera Community Development, and Renacer Foundation.
These conversations do not reflect a representative sample of Latino households in the six states examined for at least three reasons. First, the community conversations were held in only four of the six states: Illinois, California, Florida, and North Carolina. Second, as mentioned, the participants were disproportionately composed of Latinos from lower-wealth backgrounds. Third, we did not have a large enough sample from each state to draw meaningful comparisons of participants’ experiences across the states. As such, we do not attempt to generalize the findings to a wider population.
However, the conversations do reveal important insights into the lived experiences of the Latino participants, which in turn can help shape future research and policy directions. For example, there was a good deal of commonality across states in the wealth accumulation attitudes and experiences of Latinos from lower-wealth backgrounds. Additionally, debt was a salient factor in shaping Latinos’ pathways to wealth-building, which deserves more study. Finally, the conversations highlighted important policy considerations that asset and debt data alone do not portray.
Discussions in communities began with questions about different assets and debts. Participants shared whether they owned their homes or rented, held mortgages, had savings or checking accounts, had health insurance or retirement accounts, or supported family members in the U.S. or abroad. Other example questions included:
- What is your job or what kind of work do you do to earn money?
- Who is primarily responsible for paying bills? What are your monthly expenses?
- Do you have some kind of debt? If so, what kind?
- Have you ever used a payday or car title loan company, and if so, for what type of expenses?
- Where do you access financial assistance in an emergency or for an immediate financial need?
- What type of savings do you have? For example, do you have savings for retirement, children’s college education, a home, or maybe a special event or a car?
- What are your financial hopes in the future? What could help you achieve them?
Some relevant themes that emerged included:
- Earning income through more than one job
- Experiencing language barriers when seeking out employment opportunities
- Believing their pathway for wealth-building is achieved by working more and longer hours
- Fearing payday lenders as well as any other loan products with high interest rates
- Turning to family and friends for loans in times of emergency
- Turning to credit cards to make ends meet or in times of emergency
- Partaking in reverse intergenerational wealth transfers (in which adult children contribute to their elders’ well-being and retirement)
Community conversation participants emphasized the need for economic stability before economic mobility
When asked about their economic aspirations, many participants expressed wanting to own a home, while others shared wanting to start a business or save for retirement. However, many were not yet ready to focus on these goals, since they were aiming first and foremost to one day have the luxury of saving. In fact, most participants’ primary focus was on necessities such as rent, food, utilities, and health and auto insurance. Many noted that saving was difficult if not impossible, because after paying for necessities, there was not much money left over. Most participants also mentioned caring for children at home or supporting family members at home or abroad. At the same time, a few talked about how family members supported them in retirement.
Almost all the participants stated that they hoped to build wealth by either working harder, getting an extra job, or getting a better job with a higher income. Others mentioned a need to learn or improve their English to obtain a better job.
Additionally, many participants explained how they piece together more than one part-time job to ensure consistent hours of pay if one job is not stable. Said one participant: “I clean. I also make candles and soaps. We do everything to get ahead. In terms of stability, I started my cleaning business, and I only have clients from time to time…Now I want to do commercial work. But I’m working alone.” Another participant told us, “I have many jobs. I’m a warehouse manager. I create fruit paper. I also work in cleaning, and whatever comes my way to support my household finances.”
While most participants noted that working more and harder was necessary to meet the expenses of daily living, get ahead, and save, one person did point to the non-economic cost of over-working. “But working so much…that also diminishes our mental and emotional health,” they said.
Though wealth consists of more than just income or savings, building wealth is made harder when work and income are not stable in the first place. This is why many community conversation participants piece together several part-time jobs to make ends meet. Such behavior reflects national trends: Growing income inequality has been accompanied by rising income instability (or volatility) since the 1970s. Economic insecurity has also increased as public and private benefits for workers and families—such as health care, income security, and pensions—have eroded over the last few decades.
Community conversation participants also highlighted important gender-related disparities. For instance, several Latina participants were not working due to child care responsibilities (though a few mentioned working before having children). Other Latina participants, however, reported taking care of their children while maintaining either a part-time job or a small business, such as a cleaning service. These experiences are reflective of recent research by the UCLA Latino Policy and Politics Institute, which found that the high number of Latinas not working due to family care responsibilities is a trend that was exacerbated during the pandemic and has not markedly improved. According to the report, in August 2020, 1.5 million Latinas were not working for pay or profit because they were caring for family members. This number remained relatively unchanged as of August 2022, with 1.45 million Latinas not working due to family care obligations.
Participants had limited credit options and preferred to avoid debt
Most community conversation participants had negative associations with credit and debt and were more hesitant to discuss the topic. Still, many aptly and intuitively understood how credit and debt are inextricably connected. As one participant stated, “[In the United States], if you don’t have credit, you don’t count. Since we have bought everything in cash, we don’t have credit. Here, it’s a necessity to get into debt because you need credit.” The most common types of debt participants reported included credit card debt, car debt, and medical debt.
When faced with a financial emergency, many participants sought a loan from family or friends. There were also many who relied on their “tanda”—a rotating savings and credit association formed by a group of people who know each other. Each member of the group contributes money to a pool, which is then given to an individual for a major purchase or interest-free loan.
Only a few participants said they would seek a loan from a bank in times of financial crisis. According to them, some loan products take too much time and are not available when they are needed. Interest rates were very important to many participants, who sought out alternatives that offered lower interest rates and timelier loans.
A few participants mentioned using credit cards as a stop-gap measure in emergency situations. As a result, when an emergency arises, while most participants turn to family or friends, they also turn to their credit cards. These experiences were reflected in a survey from the Consumer Financial Protection Bureau (CFPB). The CFPB found that between 2021 and 2022, as Hispanic households’ finances rapidly deteriorated, their credit card debt increased significantly, especially as their incomes became more variable and they struggled to cover monthly expenses. Latinos are not alone in this experience; according to another report, 57% of Americans cannot afford a $1,000 emergency expense, and more are leaning on credit cards to cover emergency costs.
Notably, most participants said they had never used payday loans or title loans. Many said they had not used them because they had not needed them. Others, however, cited the high interest rates as a reason not to use them.3 According to one participant, “I have had many offers to use payday loans and other types of loans, but the interest is very high. I try not to use anything with high interest, and the bank is very specific and fixed when it comes to interest. But with payday loans, sometimes they earn interest per week or per month, and the interest is very high.” Other reports examining Latinos’ financial inclusion barriers reflect these patterns of avoiding payday lenders.
Participants who had used payday loans or title loans at some point in their lives expressed fears or even “nightmares” due to the high interest rates, and only used them in extreme circumstances. One participant stated, “I had a terrible experience using payday loans, it brings back nightmares. Back in 2016-17, I broke my leg at that time, and I was in the process of getting insurance but did not have insurance. All of my bills started racking up and some things I had to pay out of pocket. So I applied for one of those. I got a letter pre-approved for $3,000. But by the end of it, I think I ended up paying like $7,000 with the interest. Terrible experience, but I was desperate for money at the time.” Another participant mentioned her apprehension about a title loan her husband took out: “Even though my husband currently has no debt, he once got a title loan with our car and he didn’t tell me…He solved the matter, but he didn’t tell me until he solved it, and I was scared. We talked about it and agreed that this would not happen again. The loan wasn’t for a lot of money, but it was for less than the car is worth.”
Finally, several participants noted that debt and credit are used differently in their home countries than in the United States. In those countries of origin, for example, homes are not purchased with a down payment and mortgage loan like they are in the U.S. Rather than borrowing money to finance them, many homebuyers pay for their home in one lump sum rather than over a long period of time. As a result, when they arrive in the United States, they must learn about an entirely new financial system with subtle differences in the types of products and services offered—not just for buying a house, but also for starting a business.
Community conversations show how retirement and intergenerational wealth transfers are connected
Several community conversation participants were concerned about retirement for themselves or their family members. Yet many Latinos nationwide do not have a retirement account, and for those that do, the median value of their assets is relatively small. There are many reasons why Latinos have lower participation and allocation in retirement accounts. For example, some employers do not offer plans, or some families are not eligible for employer-sponsored plans. Immigration status also plays an important role, as it impacts the types of jobs one can get as well as qualifications for certain job benefits, including retirement plans—which in turn impacts the assets Latinos can grow. As one participant noted, “Government jobs have good benefits, including a pension, but there are too few Latinos in those jobs.”
Nevertheless, some participants mentioned setting money aside for the explicit purpose of saving for retirement. For example, a few noted that someone in their household held a retirement account such as a 401(k) plan, an Individual Retirement Account (IRA), or a pension. When asked what she cares about most when making her financial decisions, one participant said, “I focus on ensuring I have something when I retire, and that there is enough set aside for my children’s university education. I also set aside 10% for fun and 20% for emergencies.”
Relatedly, the community conversations revealed an interesting finding: Some participants had homes in their countries of origin, which they viewed as investments they can turn to in an emergency or as retirement plan. If the worst happened, for example, they would be able to sell their property to help them weather a financial storm. As other scholars have noted, many nationally representative surveys designed to assess economic conditions or inequality lack information on wealth and assets individuals and households hold abroad. Thus, a transnational perspective on wealth, including for Latino immigrant populations, is an area for further research.
Still, due to their primary focus on day-to-day expenses, many families were unable to plan for retirement. One respondent summed up what was heard across the groups: “To be able to save is on the wish list.”
Others relied on their children as their retirement plan. When asked how one might go about planning for old age, one participant suggested, “Having a child or two, even if it’s only for food until one dies of old age. But for one to have money for retirement, like taking out every month [from earnings], I don’t think so. I think the majority do not [do this].”
Participants expressed similar sentiments regarding intergenerational wealth transfers between parents and children. Although respondents aspired to leave something behind for their children, at the moment, paying for daily living expenses was their top priority.
Families can transmit wealth and resources directly to the next generation in a variety of ways. For example, they can provide gifts to their children and grandchildren, such as down payment assistance for a home purchase. Presently, wealth is relatively high among white households because they are more likely to have received an inheritance or gift. According to the 2019 Survey of Consumer Finances, Latino families are both less likely to receive an inheritance and less likely to expect to receive an inheritance: About 4% of Latino families expect an inheritance, compared to 17% of white families, 6% of Black families, and 15% of other families. White households also tend to receive much larger inheritances compared to other groups.
Many of the participants noted reverse transfers of wealth and resources between children and parents, in which children supported parents for both daily expenses and retirement. One participant noted, “I work cleaning homes. My children, who are 18 and 21, are the ones who support me. I have limited resources.” Said another participant: “I have my daughters here. Anything I need, I ask them to help me.” A third participant highlighted the intergenerational dynamic of wealth transfers when she said, “I am the main one in charge of covering our household expenses, although my children help me. I also send money to Mexico since my brother is sick and my mom takes care of him, so I support him.”
Indeed, for many participants, household expenses were covered as a family unit. One participant shared, “I am economically helping my mom. I use credit cards because it makes it easier for her to buy what she has to buy, and I just get the payment.” Another stated, “I have a card in my son’s name. I use it for the larger household expenses —for the heater, for air [conditioner], whatever. But for when I just want to buy something and I don’t have money, no.”
Community conversations informed important policy directions
The economic circumstances of each Latino family or individual will vary, so different supports will be required to reach economic stability, wealth-building, or both. Those who start in a position of economic precarity or with income or employment insecurity may have to first achieve stability before they can achieve wealth-building goals. In contrast, if a family or individual has achieved financial stability, they may be more concerned about saving and figuring out where and how to invest their money, buy a home, start a business, or plan for retirement.
Critically, in the absence of significant public investments in the types of policies and programs that can support economic security and wealth-building, the American economy has become increasingly reliant on consumer credit—making credit and debt more salient policy concerns for Latino communities. Nevertheless, the use of credit as a temporary fix (or for economic security purposes) is not sustainable for many families, as it does not address long-term issues such as persistent income and employment insecurity. Latino families may also risk becoming further indebted if they use credit for these purposes. Furthermore, credit for economic mobility endeavors may be inadequate given the racialized dimensions of debt, which can result in different terms or returns for Latinos.
Thus, building Latino wealth will require significant federal investments, subsidies, and programs aimed at achieving the following goals:
- Subsidizing asset-building and growth in human capital for low- and moderate-income families.
- Expanding policies aimed at reducing or eliminating household and individual debt.
- Developing public policies aimed at reducing wealth inequities and bolstering intergenerational transfers of wealth.
- Increasing access to quality financial information networks (which is distinct from financial literacy).4
- Expanding policies and public subsidies aimed at creating income and job stability and security, especially for Latinos not yet able to focus on economic mobility.
Moreover, given that large segments of the Latino population live in certain states—as well as the tremendous regional and geographical differences between Latinos—it also makes sense to take a regional or state approach. The goals highlighted above can thus be achieved through some example policies that can be considered by all levels of government (Table 10). The list below is by no means exhaustive, and some example policies may also support more than one goal.
Table 10. Example public policies to bolster Latino wealth
|Goal: Help families or individuals||Example public policies||Government level|
|Build assets or increase human capital||Invest in greater enforcement of anti-discrimination laws, including those pertaining to financial institutions’ lending activity.||Federal and state|
|Require banks to offer no- or low-cost bank accounts and services (consider subsidizing this requirement), bolster subsidies for credit unions that serve Latino and Black communities, or provide accounts through postal banking or other public banking options.||Federal, state, and local|
|Expand access to and participation in Social Security and other retirement plans, including for undocumented immigrants.||Federal and state|
|Increase public subsidies for higher education and career training.||Federal, state, and local|
|Reduce or eliminate debt||Cancel medical debt for qualifying residents and remove medical bills and debt from credit reports.||Federal, state, and local|
|Transfer intergenerational wealth||Create a baby bond program.||Federal and state|
|Expand tax credits or subsidies for individuals who support parents and older relatives.||Federal and state|
|Access financial information networks||Create a financial information navigator program to connect Latinos to high-quality and affordable specialized supports (this can also include a broader financial health corps).||Federal, state, and local|
|Achieve income and job stability and security||Provide families and individuals with a guaranteed income.||Federal, state, and local|
|Bolster the Child Tax Credit and the Earned Income Tax Credit||Federal and state|
|Raise the minimum wage to a living wage.||Federal, state, and local|
|Improve access to affordable and subsidized child care.||Federal and state|
|Expand access to and level up unemployment benefits and partial unemployment benefits, including for immigrants.||Federal and state|
Both parts of this report highlight areas for future research
Based on asset and debt data as well as community conversations across the six states, several areas warrant further investigation. While some of these topics are mentioned in the report, below we highlight and expand upon two particular areas that would benefit Latino communities in the future.
Home equity and home debt
Home equity is the difference between the value of your home and the amount of money you owe on your mortgage. To increase the value of equity in a home, either the home value needs to increase or the amount of money owed on the mortgage needs to decrease. One area of future research thus includes better understanding Latinos’ home equity and home debt values in each of the six states examined. In Illinois and Texas, for example, a larger share of Latinos held equity in their own homes. Yet the median value of that equity was much lower than for white households. A deeper understanding of equity, housing values, unfair lending practices, and appraisal biases would help us understand the context behind the numbers.
For example, some evidence suggests that home appraisals in majority-Latino neighborhoods are about twice as likely to be undervalued compared to homes in predominantly white neighborhoods. A recent Freddie Mac report found that between 2015 and 2020, approximately 15% of single-family properties in majority-Latino census tracts were appraised lower than their contract price (compared to 12.5% in majority-Black areas and 7.4% in majority-white areas). In areas where Latinos represent 80% or more of the population, the rate of homes with lower appraisals increased to 16.7%. Lower property values can mean less home equity.
Meanwhile, other research suggests that Latinos are impacted by higher property tax assessment values—meaning that Latinos may be paying more in property taxes than they should, leaving less money for them to save or put back into their home to increase their equity.
Research in these six states should seek to answer whether Latinos encounter lower appraisals or higher property tax assessment values compared to white households. If they do, we need to understand why these disparities exist and by how much. Finally, policy aimed at rectifying these inequities must be enacted.
Intergenerational wealth transfers
Some scholars have documented the patterns of reverse wealth transfers in immigrant households between second-generation, socially mobile children and their parents who retire without savings or who lack ties to the social safety net. Others have focused on specific Latino national origin groups, such as Mexican Americans, highlighting how these groups rely on their own economic activities for wealth accumulation rather than intergenerational wealth transfers.
However, the financial strategies employed by Latino families to transfer resources across generations deserve further study, as such transfers are one of the key factors contributing to wealth disparities across racial and ethnic groups. It would be worthwhile to build on the work of scholars who have examined mobility (or stagnation and decline) across generations to better understand Latinos’ unique experiences with resource transfers. Moreover, more research is needed to understand the context behind the existing disparities in wealth transfers between racial and ethnic groups and within different Latino national origin groups.
While there are many factors that differentiate Latinos (including racial diversity, immigration status, timing of migration, and generational differences), this report emphasizes the importance of examining regional differences as well as the lived experiences of Latinos. It is worth asking why Latinos do better in some states than others, what people- or place-based factors help explain these differences, and which successful policies, programs, and initiatives can be scaled or replicated elsewhere.
Moreover, the community conversations—though not a representative sample of Latinos across the six states—were important for highlighting wealth-building barriers and aspirations, as well as informing potential policy directions. Participants highlighted the importance of achieving economic stability before economic mobility, the limited credit options available to Latino households, the preference to avoid debt, and the connection between intergenerational wealth transfers and retirement. These topics deserve further attention and study.
Policymakers have an opportunity to address wealth and other economic disparities at the national, state, and local levels. Given the Latino community’s size and economic contributions, they will continue to shape the U.S. economy for decades to come. By actively and intentionally working to remove barriers to Latinos’ wealth-building efforts, policymakers can foster not only their economic mobility but also the nation’s economic future.
The data sources for this report were the Survey of Income and Program Participation (SIPP) household wealth and debt tables by race and ethnicity for California, Florida, Illinois, New York, North Carolina, and Texas. The reference period of the 2022 SIPP is January 2021 to December 2021. In the sampled households, survey respondents are not restricted by citizenship.
Constructing median household wealth and debt variables by race and ethnicity in this analysis was done using the same methodology as SIPP-published data that does not use race and ethnicity. In the SIPP-published wealth and debt tables by state with no race or ethnicity, there are several conditions applied to the data when calculating median household wealth and debt. These same conditions were applied when constructing the racial/ethnic data for this analysis. All data for this report was prepared in RStudio.
- Estimates are conditional on asset ownership, for example. Median home equity for Latinos in Illinois is only calculated for Latino households where home equity is greater than zero. Latino households with zero home equity are not within the calculation of median household home equity.
- Exclusion criteria for the sample were group quarters and households in which the household reference person was either living outside the United States in December 2021, living in institutionalized group quarters in December 2021, or living in a non-permanent accommodation in December 2021.
- The medians used in this analysis were interpolated medians. Interpolation is used to help determine what data might exist outside of the collected data. Interpolation medians are better able to represent whether the weights of the data are above or below the true median.
Finally, to provide some context to the quantitative data, 13 community conversations were held in English and Spanish across four of the six states between April 2023 and August 2023, with a total of 107 participants. The four states were Illinois, California, Florida, and North Carolina.
Acknowledgements and disclosures
We would like to thank and acknowledge our contributing partners in this project: East Coast Migrant Head Start Project, La Luz Center, Prospera Community Development, and Renacer Foundation. Thank you also to the Latino Policy Forum’s Acuerdo Network, the reviewers of this report, and the Chicago Community Trust for their financial support. The collaboration and support are appreciated; however, such cooperation does not constitute an endorsement of the report’s conclusions or recommendations by any of those organizations.
We would also like to thank Carlos Lopez for his data analysis support, as well as Anna Arzuaga, Nina Sedeño, and Angela Anderson Guerrero for their research support. Special thank you also to Roberto Valdez Jr. of the Hispanic Federation.
The report’s authors take full responsibility for the report’s content and any errors it may contain.
- While this report benchmarks Latino wealth with white wealth, the intention is not to center the importance of whiteness but rather to highlight the disparity between the groups. In future reports, Latino and Black assets will be examined, as well as opportunities for group collaboration to support policy solutions.
- Due to constraints with the sample size of the SIPP data, this report is not able to provide a detailed analysis regarding the types of debt that make up the secured or unsecured debt for Latino households.
- It is important to note that community conversation participants were recruited from community-based service providers, which may have impacted their financial knowledge regarding payday lenders.
- While arguments in favor for more financial literacy assume that financial information is universally accessible and effective, access to quality and customized financial information (including for credit needs) is not available to all borrowers. Moreover, segregation of social networks impedes access to quality financial experts, and in some cases, facilitates access to predatory information for communities of color.