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lifestyle
Cultural Background Affects Americans' Ability To Reach Financial Goals
In a December report, The Cut: Exploring Financial Wellness Within Diverse Populations, Prudential Financial builds upon the findings from their 2018 Financial Wellness Census. I spoke to Jim Mahaney, Vice President of Strategic Initiatives at Prudential Financial, about the report and its findings. The biggest takeaway is that cultural background and experience influences the financial standing of individuals and communities. Perhaps this should be obvious, but traditional financial advice does not often take this fact into account.
So what did the report find about different communities in the United States?
Asian Americans
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Tend to have a higher median income
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Have saved a greater percentage of their income than others
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Are more likely to be employed
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Household income varies greatly depending upon where they were born
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Foreign-born Asians who participated in the survey are significantly more optimistic about the future than the general population
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Place high levels of importance on financial goals, especially those that revolved around helping their children and their parents
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Caring for other generations within their families isn’t just a goal, but a current reality that they face
Black Americans:
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Are optimistic about the future
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Prioritize assisting others financially
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Reported saving far less than the general population
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Homeownership for black Americans remains elusive
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Are as likely as the general population to carry credit card debt (42% of black households versus 40% of general population households)
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Rely more on insurance rather than inheritances to pass on wealth
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Those making over $60,000 struggle more with student loan debt
Latino Americans
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Responded to the survey at a lower rate
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Are younger, more urban, and more likely to have served in the military
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Prioritize paying down debt
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Place a high importance on supporting family members, particularly the younger generation
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Are less likely to take advantage of retirement plans, life insurance, and other products
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Are more confident than the general population that they will reach their financial goals, especially if they are foreign-born
LGBTQ+ Americans
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Reported having lower incomes than the non-LGBTQ population
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Men are less likely to be married or have children, and also place less importance on financial goals
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Women were more confident than men that they would meet their financial goals
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Women are more likely than men to have children
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Own fewer financial products, including retirement accounts
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Are more likely to ask for and receive financial advice
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Are saving less for retirement than their non-LGBTQ peers
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Face obstacles to financial success in the form of job discrimination and unequal access to benefits
Female Americans
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Are the breadwinner in more than half of households
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Have more non-financial responsibilities, like caring for children
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Place more emphasis than men on financial goals, but are further behind in reaching them
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Still experience a wide wage gap
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Are in more debt than men due to lower incomes and higher student loan debt
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Are saving less than men, including for retirement
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Are more worried than men about their finances
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Have a difference financial experience based on their race
Caregiver Americans
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Make up nearly a quarter of American adults
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Work outside the home
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Are more likely to be people of color
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Often identify as disabled themselves
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Under more stress due to the time and financial commitment
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Have to take care of parents who didn’t save enough for retirement
So where do we go from here?
Mahaney said it’s important that financial advisors and planners take background and experience into account while serving a client. “Be sensitive to where each segment is coming from and where their financial challenges come from,” he said.
This is important because financial services are beginning to expand beyond just focused on retirement savings. Americans are looking more and more for support when it comes to everyday money management. This includes factors like financial security, paying down debt, buying a home, and preparing to care for children or other family members. A client’s cultural and familial background is going to affect how they approach money management, and financial service providers should be aware of that in order to be as helpful as possible.
“We need to be helping people more in managing their day to day expenses, and controlling their debt, not exclusively saving for retirement and having insurance in place,” said Mahaney.
How can financial service providers do this?
Mahaney said that financial professionals must ask more questions that go beyond the immediate. Don’t generalize; ask specific questions like, “will you be caring for an aging parent?” These questions will help expand the scope of the conversation and allow professionals to find out what their clients actually need at any given moment.
These conversations can still be difficult to have, but they are imperative. For financial professionals, it’s important that they show their clients that they aren’t alone in their struggles. For individuals, it’s helpful to start conversations about money with friends and family. Use social media to celebrate progress and big wins. Show your loved ones that it takes many steps to improve your financial situation.
Normalizing these conversations will make it easier for individuals to reach out for help and will allow financial professionals to help their clients even more.
This post was originally published on my ForbesWomen column.
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