El Espace is a column dedicated to news and culture relevant to Latinx communities. Expect politics, arts, analysis, personal essays and more. ¿Lo mejor? It’ll be in Spanish and English, so you can forward it to your tía, your primo Lalo or anyone else (read: everyone).
In elementary school, I won a $100 savings bond in an essay contest. “Guardalo,” my dad said, explaining that the longer I kept it, the more valuable it would become. I tucked it into an old journal and mostly forgot about it. In hindsight, it was the first time I made money from writing, and I should have valued it more, but I was disappointed not to have cold, hard cash.
I had no understanding of saving or compound interest back then. My family’s needs were immediate: food, clothes, rent. I wasn’t saving, except maybe for some candy. In general, financial literacy among Latino communities is lower than that of the average adult in the United States, particularly among first generation immigrants, most of whom are scraping by on low-paying jobs.
“If you are living within a certain amount of economic insecurity, you are not worried about 59 and a half, you are worried about next year,” said Ramona Ortega, who started a mission-driven financial technology company, My Money My Future, that teaches financial literacy and provides personal finance tools to millennials of color. The result is a tendency to keep money in cash (sometimes at home, which Ortega calls “so risky”) so it’s easily accessible and, also, a general disinclination toward investing, which is crucial to building wealth.
“People don’t buy what they don’t know,” Ortega said, and for Latinos and black families, that’s meant a historical reliance on real estate as their primary form of investment. This backfired during the housing crisis, when families of color (and Latinos in particular) were hardest hit, losing more than 50 percent of their net worth; whites, by comparison, only experienced a 16 percent drop.
Millennial Latinos today are better off than their parents. We are more likely to go to college and get a decent job that affords us some disposable income. But the income gap still affects us the most, and many of us never learned to manage money, let alone help it grow.
“We often lack the confidence, because we don’t have access to trusted financial advice,” Ortega said. She created My Money My Future to fill that gap. Here, she offers her best personal finance tips for millennials of color.
Take that cash out from under your mattress.
If you don’t have an emergency fund, set a goal to save $1,000 and build up from there, aiming to have enough to cover three to six months of living expenses, Ortega said. If you already have enough cash to cover incidentals, the rest should be invested.
“There is this notion that people who don’t have much money don’t save,” said Ortega, but “The problem is that we are saving, not investing.”
Cash sitting at home or in a regular checking or savings account is losing money, Ortega said, because it’s not keeping up with the rate of inflation. Let’s say you have $10,000. Determine how much you need to have readily available to feel secure ($3,000 for instance), put that in a high yield savings account, and invest the rest. “That money should be helping you make money,” she said. She recommends a 401(k), if your company offers it, or a Roth Individual Retirement Account (IRA).
Don’t sleep on credit.
“It’s true there are bad forms of debt,” Ortega said, like credit card debt that is rolled over month to month. “But good debt allows you to leverage and build wealth.” By good debt, she means credit cards that are paid off every month and on time, as well as federal student loans, which often carry a lower-than-average interest rate. How consistently you pay off these debts determines your credit score, and those who don’t have a good credit score (700 or higher) end up paying more in interest over time, especially on big budget items like a home or a car.
When you file your tax returns this year, take the opportunity to request your free annual credit report and do a financial inventory. Look out for errors or old debts you can easily get rid of (like that $60 you still owe your phone company, for example).
Budget for family support.
“If you are sending remittances home and that is going to be something you do on the monthly, it has to be part of your financial plan,” said Ortega. It can also be a good idea to openly discuss with your siblings how you plan to support your parents, “perhaps setting up a separate account where you all contribute,” she added.
A lack of financial literacy education means that many “end up making a ton of money mistakes over a lifetime that are extremely costly,” Ortega said. But investing for the future is “actually what creates financial stability over time.”
Let’s secure the bag in 2019, shall we?
Here are more stories to read this week.
El Roundup
WHEN THE NET IS CAST TOO WIDE
A recent New York Times Magazine article tells the important story of Alex, a Honduran immigrant who became collateral damage in a crackdown on MS-13 gang members.
LOTERÍA 2.0
There’s a new version of this classic Mexican game that reimagines the card names: “La Campana,” the bell, has become “El Notification.” La Calavera,” the skull, is now “El Gluten.” “El Paraguas,” the umbrella, has become “El Safe Space.” ?
Millennial Lotería cards!
ABOUT THE WALL
El periodista Jorge Ramos responded to President Trump’s national address on immigration in our Opinion section. “The wall has become a metaphor to Mr. Trump and his millions of supporters. It represents a divide between ‘us’ and ‘them,’” he wrote.
SHADES OF BEAUTY
Does skin color influence skin care needs? Some brands are banking on it.
La Ñapa
This story about a crop of Afrocentric schools in Brooklyn designed to empower black students gave me all the feels. The U.S. education system has been historically unkind to its students of color — excluding or sanitizing their history, over disciplining black students, showing insensitivity to diverse cultures — but these Afrocentric schools offer parents an alternative space where, in the words of one of the school founders, “You see you.”
Do you have suggestions for El Espace? Want to receive it as a newsletter? Let me know: elespace@nytimes.com
