3 Ways to Build Generational Wealth as a Latinx Family
When Kristoffer Aponte was growing up, his single mom, a Dominican immigrant, never talked much about dinero. Sure, she paid the bills on time, had impeccable credit, and taught Aponte and his brother the value of hard work by pulling long hours at the hospital where she was employed. "But she never took that next stop to grow her nest egg," says Aponte, a pastry chef in the Bronx, New York. Aponte, on the other hand, has a different relationship to money, one that extends beyond the day-to-day and into the future. "For me, financial stability means having enough money saved to make my kids' lives a little easier," says the dad of three. "I want them to go after their dreams knowing they have security."
Aponte isn't alone in this quest. According to Jannese Torres-Rodriguez, a Puerto Rican financial coach and host of the Yo Quiero Dinero podcast, more and more Latinx parents are focused on building generational wealth for their kids, despite the fact that financial literacy can sometimes feel like a different language. "If you're first- or second-generation, your parents' monetary goals may not have been growing their assets, but rather surviving in a new country and even supporting relatives abroad," Torres-Rodriguez says. "So the idea of generational wealth, or leaving money for the next generation, is relatively new."
But it doesn't matter if you have a lot of cash saved up or a little, you can ensure that your children have more financial freedom than you ever did. The key, experts say, is to start working on your legacy right now.
1. Overcoming Fear
First the good news: Data show that each Latinx generation in the United States is better off than the previous one in terms of income and education level. Many of us have our parents to thank for that. So even if they didn't teach you the difference between an IRA and a 401k, you're already a step ahead. You also have more tools at your disposal (such as financial-planning and investing apps and online educational resources) that can demystify the difference between a stock and a bond, as well as greater access to high-paying jobs with benefits, says Torres-Rodriguez.
Yet many Latinx people can't seem to shift this "survivor mode" mindset to one of wealth-building, says Jully-Alma Taveras, a Dominican American financial educator and the founder of Investing Latina. "A lot of us inherited that money mentality from our parents," Taveras explains. "Although your financial situation might be better, you may still carry that feeling of always being behind or needing to catch up."
This uncertainty is a feeling that Amanda Rosado, of Austin, is familiar with. The mom of two did learn about money management by receiving an allowance as a kid, but she still stresses about her finances because of her parents' money problems. "My mom quit her job and started a business that didn't work out," Rosado recalls. "And because of that, I always have this feeling that I'll never be settled, regardless of what my bank account says."
But "if you're not doing more than your parents did, you're not progressing," Taveras says. "It is our responsibility and privilege to build on the sacrifices of those who came before us, whether that means investing in a home or in your future by switching careers. "After all, isn't that what propelled many of our parents to immigrate to the United States?"
Taking financial risk may be daunting at first, but consider the merits of the calculated risk. "You can live your whole life hiding your money under a mattress, so to speak, but it won't propel you forward," Taveras says.
2. Breaking the Cycle
You may be ready to rewire your thinking around money, but changes won't happen overnight. That's okay. The important thing is to do something, such as saving an extra $100 a month, tackling student-loan debt, or taking on a side hustle to boost your savings. "So many people tell me, 'I'm starting too late,' " Taveras says. "But it's never too late to prepare."
Part of that prep work is creating a financial plan tailored to your familia's needs. Think about your goals and your family's long-term aspirations, and then consider sitting down with a financial advisor. Many offer free consultations and can guide you on everything from setting money aside for retirement to creating a college fund for your child. The Foundation for Financial Planning (ffpprobono.org) also offers pro bono financial planning, and it's a good idea to learn what kind of money management and investing services your workplace might offer free of charge.
And remember, creating generational wealth means taking steps to move ahead in your career too. "Maybe your parents worked the same job their whole life or waited until their boss saw fit to give them a raise," Torres-Rodriguez says. "But you can decide, 'You know what? I'm not going to wait for my job to figure out my value. I'm going to go to another employer. I'm going to negotiate my salary next time there's a discussion around it, or I'm going to create multiple income sources so that I can really get what I deserve.' "
That's ultimately what led Aponte to leave a stable job to start a bakery delivery service with his partner, Susana, during the pandemic.
"Sometimes building wealth and security for your family means taking a leap of faith," Aponte says. The move not only gave him a chance to pursue his passion, but the low overhead meant he could generate income almost immediately and build on that. And guess what? It's paying off. "Susana and I have both made a concerted effort to get out of a 'stability mindset' when it comes to making financial decisions for our family," Aponte says. "It's not how we were raised, but it's what we want to show our children."
3. Modeling Good Habits
Of course, making intelligent financial decisions is only part of creating generational wealth. You also want to pay attention to how you talk about money in front of kids, says Linda Garcia, founder of In Luz We Trust, a community of Latinx investors, and coauthor of the children's coloring and activity book My Stock Market Workbook, which introduces kids ages 2 and older to stock-market terminology. Begin by teaching them the ABCs of financial literacy and getting them comfortable around money. Rosado, for example, set up investment accounts for her teenage and infant daughters, and she made sure to go over each step with her oldest. It's part of her plan to raise money-confident kids. "I have been showing my 15-year-old the value of a dollar since she was 5, giving her an allowance so that she can spend it and understand what things are worth," she says. "Now that she's older, we go over her pay stubs, and anything she gets for her birthday or as gifts automatically goes into her savings."
You may not be a stock-market whiz, but you can still use finance lingo around your child too. For young kids, "it can be as easy as normalizing phrases like, 'We're saving up to buy a house,' or 'We're going to budget for that,' and then moving on to more complex topics, such as investing, later," Garcia says. "Whatever your kid's age, look for opportunities to discuss money, like when a bill arrives in the mail or you withdraw cash at an ATM. Your child is watching how you handle money and will pick up more than you think."
That's something Aponte takes to heart. He believes in taking the mystery out of money by having frank conversations with his kids.
Aponte continually tells his children about the ins and outs of managing money as a small-business owner, and he has covered the process for getting a loan from the bank. "When I was growing up, I never knew what my mom's salary was or how much savings she had," he says. "My kids have a lot more insight into my wallet, and I'm not always used to being so transparent. But if it makes them all more comfortable dealing with money, it's well worth it."
You might even say, it's a good investment.
This article originally appeared in Parents Latina's April/May 2022 issue as "Make Money Moves"