Exploring the Financial Literacy Gap + the Impact on First-Generation Women
Updated: Jun 28, 2022
You’ve probably heard of the stereotype - immigrant families are notoriously known for not talking about money with their children. Well, some stereotypes aren’t far from the truth, and indeed, immigrant families are terrible at discussing finances. However, when they do, they instill the same outdated ideas: open a business, work from 80 to 100 hours a week, save like old Scrooge until you’re 80, and just like that, you have little to no time to reap the benefits of your hard-earned money. Of course, they believe it because that’s what their predecessors did. They tend to forget that times have changed, systems have changed, and so have the ideas around money.
I am an immigrant currently working in the financial sector in Europe. I have received the same old ideas from my mother, an immigrant in another country. After trying and failing multiple times following her suggestions, I took to Google and financial forums to learn about financial literacy. What I found was overwhelming. The knowledge of finances was vast on the internet, yet I could not narrow it down to my needs. This was because most of the sources out there excluded a large section of the population - first-generation immigrants.
Granted, there is a lot of information out on finance targeting immigrants and first-generation kids. But these sources do not count for the nuances of the financial dynamics taking place in immigrant families, specifically immigrant parents with their first-gen children. My relationship with my family on finances is different from another immigrant family. It is simply not the same. So, where does the problem truly lie? Is it the families themselves or a system forgetting to account for smaller details, like those of the immigrant aspect? In my search for an answer, I reached out to Yesenia Alvarez Padilla - a graduate research associate and PhD student at Ohio State University. Her current research focuses on money talks between parents and their children amidst the Covid-19 pandemic. She is also interested in “family financial socialization” processes - a topic exploring the experiences of immigrants impacting young adults in learning about personal finances and its subsequent effect in adulthood compared to the general population.
I wanted to explore the financial benefits that people cannot take advantage of due to their immigrant status. She shared her observation and experience from immigrant families regarding the gaps in financial benefits: “I would say a lot of the gaps of financial benefits for immigrants can be related to their limited social capital or issues with legal status or both.
Immigrants don’t always have the same understanding of financial institutions and products because they are coming from other countries with a different (often weaker) financial system.
They distrust financial and other public institutions due to their experiences in their home country. Of course, it is also important to note how language or cultural barriers can impact how accessible financial institutions and financial products are.”
Corrine Cashin, an assistant director of a program providing resources to students on public assistance, noticed something more ingrained within immigrant families that causes them to avoid beneficial financial tools. In her observation, she noticed a lack of connection between immigrant and first-generation families to the exact resources that can help them improve their situation.
“I ask them why they aren’t using specific resources and their response will be ‘I didn’t know [about the resources].’ My response is, ‘Well now you do, so let’s get to work,’ and they absolutely know how to work.”
That is something I have experienced myself. I did not know a lot of things about finances, not even the basic things, like how pensions worked. Up until I was told about it, I didn’t really know anything about pensions. Then the next questions should be, why didn’t I ask. But Corrine phrased the question better.
“Why didn’t they feel safe asking?”
Immigrant families are not really known for asking for help, something I have noticed in my mother and, sometimes, me due to her influence. Corrine shared the story of her grandmother who read, wrote and spoke five languages, she was a master seamstress, and she was also the first generation born out of slavery. Yet she felt unintelligent due to her accent. Why?
It is because there are no safe spaces for immigrants to ask for help. Asking for help is a sign of weakness, a stigma many immigrant families believe and pass onto their children. We are known to be the superhumans who can pull everything by our bootstraps and without relying on anyone. But this is often a dangerous point of view, and a lot of us are beginning to see it. Corrine shares,
“Not knowing and asking is part of the learning experience to make and evaluate decisions. Creating safe spaces to help individuals grow shouldn’t be a Herculean task. In my experience, exposure to opportunity in safe spaces creates amazing opportunity.”
And I, like many others, agree. A safe space would allow people to open up more about their conditions and share knowledge with each other.1 However, as we all know, money talk does not really run in our blood. In exploring the topic of “money talks amongst immigrant families”, Yesenia shared her experience with her parents who did not really have any explicit conversations about financial topics growing up. Like most of us, their “money talks” were mostly around the importance of hard work, and not spending money frivolously on unnecessary things.
“I learned a lot about finances from my parents’ certain behaviors, such as having no debt because they did not like it. Although I was actively saving and avoiding debt, I didn’t really understand the implications [of] adopting my parents’ financial behaviors would have on my financial situation as an adult until I began reading personal finance books and learned about FIRE (Financially Independent Retire Early). In reflecting on my FI journey, I realize I may have easily ended up making more financial mistakes or getting into debt had I not learned those implicit lessons or seen my parents manage their money and focus on saving.”
Our parents are not really wrong - but they’re also not really right in the current economic situation. Just saving was sufficient during their time (and their financial experiences have been distorted due to many economic catastrophes). Now, Yesenia understands her parents’ views were narrow in the sense that they were not really open to many financial instruments, like investing. Despite Yesenia’s attempt to educate them, they have continued to not be very interested in learning about investing.
What lessons can we take from this? So far, I understood that we need a safe space to ask for help and not be ashamed of it. We need to talk more about money to understand the varieties of financial tools out there to be utilized. Tiffany Duck, a mother of two was raised by a single mother who faced poverty in her early life. In her journey to financial stability, she learned some practical tips on finances which she shares with us.
“Stay away from or pay down high interest credit card debt - they are very expensive, and they eat your discretionary income. If you allow these balances to continue to grow it can be very difficult to pay them down in the future. Start learning about finances, saving, and investing at an early age. Compound interest is the game changer. If you have a talent or skill that you love, try to turn it into a side hustle.”
Of course, not everyone is a business owner or wants to be one—she understands that. But she also adds how so many can benefit from having even a small side hustle.
She summarizes it on a positive note, “Celebrate your wins, your success, and what you have accomplished now. Gains in the financial world take time. Getting out of debt may take time. So pat yourself on the back and keep moving forward. Even if you mess up, get back on track and keep moving forward.”
So, what is being done to resolve these gaps in financial literacy? Corrine helps students who are first-generation, immigrants, and refugees through Citizenship Now and other volunteering programs. Additionally, she has created a financial literacy curriculum teaching wealth-building through food and finance.
“It is impossible to hold space for wealth building and scarcity simultaneously.” Corrine said.
She not only helps others through her work, but she also helps the people closest to her. She went on to prove that children can influence their parents about financial literacy and education when she convinced her own mother to go to college to pursue higher education.1
Tiffany started saving for her children’s future - for their college and to give them a stepping stone. Though she is aware the starting amount is small, it will compound to grow into something bigger. She and her husband were also encouraged to monetize their hobbies. Her husband started an art business which started bringing extra income in the family. Tiffany herself started consulting on the side.
The crucial ingredient to fill the financial vacuum amongst immigrant families and their children is to be in a correct economic and financial climate i.e. leaving the comforts of their home countries and taking the path of an immigrant life to achieve and provide that safe climate for their children. Now if someone asks me about wealth building and personal finance, I ask them two questions - firstly, is it possible to learn about and flourish financially in your country’s current financial and economic climate? If not, are you able and willing to relocate? These questions have been very important in my case. Of course, relocating may not be an easy solution for many, in which case, reaching out to like-minded people is absolutely crucial to receive information and support to reach your destination. Which is what I did during my search to relocate through my local women-centric Facebook group (Meye - Sisterhood) who provided me the information and moral support, without which, I couldn’t have made it.
With all the facts discussed, here are my two cents as to what first generation women can do to close the gap on financial literacy:
Observe your financial state and prioritize your financial goals first - It could be to increase income before setting up an emergency fund. Perhaps you do not have disposable income after all necessary expenditure to invest. Your goals could be to buy a house, relocate or set up pension accounts before thinking about investing. Regardless of your situation, make a list of your priorities before making any decision.
Get comfortable asking questions -
Ask friends, family, online forums, and even your employer or colleagues, if you feel comfortable. Since most of my friends and family had little idea about financial literacy, I was comfortable enough to look to my employer for guidance for financial matters.
Narrow down sources - Many become overwhelmed with online research since there is so much information out there. Clamp down on decision fatigue by narrowing down to a few relevant sources. I relied on sources like Reddit for practical application, TheBalance and Investopedia for basic understanding.
Study more - Learn the basic financial concepts like emergency fund, compounding, retirement and pension accounts, stocks, bonds and funds. Again, I took to websites like Investopedia and TheBalance to get a general picture.
Lastly, take the first step -
This depends on your situation. My first step to understanding investing was creating and putting money in the voluntary pension account since they had the same options as a normal investing account. However, I was more secure investing in pensions because of tax benefits and I was aware that institutions are more likely to secure my pensions than my investments. Although, I didn’t know at that time what I was doing, I simply took the leap of faith and put 50 Euros in to see how it worked. Months later, when I noticed some increase in my pensions, I had some basic understanding and based on my limited knowledge, I started looking into related topics like fees, index funds, ETFs and benefits of each pension package. That allowed me to decide which funds I should choose next and change my current pension funds to cheaper ones.
My exposure to FI did not happen until I got my current job as a financial content writer for an investment company. My research on financial topics made me realize that I was not financially secure, despite my good salary and financial stability. Although I had savings (like most immigrants), I had no investments and lacked the long-term vision on overall wealth growth, hence I had to dive into more research. The first step was to join as many online forums as possible to gather ideas followed by narrowing them down to my country as most of the options were not available due to my location. I got in touch with institutions that offered free financial counseling to see what plans were available for me. It was not easy as most of these services were not in English, however, it did help me to conjure a basic financial plan--6 months emergency funds, buying myself a home and setting pensions. Credit also goes to my employer with whom I discussed financial options and he kept me updated on knowledge of the financial market.
Now, 3 years later in a foreign land with no family connection or support, I not only bought my first home solely on my salary but I am also able to plan for early retirement. This would never have been possible back home.
Olivia Akerele photographed by Starla Kay Mathis; Article by Shahima Akter Topu
1 Akter Topu, Shahima, and Corrine Cashin. Women Seeking FIRE Share. Personal, May 24, 2021.
2 Akter Topu, Shahima, and Yesenia Alvarez Padilla. Women Seeking FIRE Share. Personal, May 17, 2021.
3 Akter Topu, Shahima, and Tiffany Duck. Women Seeking FIRE Share. Personal, May 9, 2021.