I came across an interesting article in the Milwaukee Journal Sentinel that claims that for Latino and African-American minorities, lack of saving is a cultural issue:
The notion of a planned retirement is relatively new for African-Americans and Hispanics who grew up expecting to help pay for the needs of extended family – particularly older relatives – with the assumption that they, in turn, would be taken care of in their own old age. Those of us who have achieved a middle class living want to buy houses and enjoy our status. All of this, plus the generally lower wages that minorities earn, mean that saving for retirement tends to be overshadowed by immediate responsibilities…
“People of my generation want to have a big house even if it’s not in their budget,” says Sean Lowe, a 25-year-old financial representative for Northwestern Mutual Life Insurance Co. “They’re not trying to use a lot of their money toward retirement. If they’re not contributing to their retirement, where (will) the money come from to take care of themselves and their families?”
That’s a good question. But you have to understand their logic. Many African-Americans of my generation and younger have had it rough growing up and usually are the first in our families to go to college and attain a corporate job. When you’ve been deprived much of your life, it’s hard to forgo the trappings of middle-class success – the big house, the expensive car and the fancy clothes. That makes planning for retirement a hard sell.
I have a hard time with this argument. I’m not saying that minorities don’t face added problems when it comes to saving money, but I don’t see it as a cultural problem. I see it as an educational problem or possibly an economic problem since both these groups earn less money that their white counterparts. Trying to keep up with the Jones’ isn’t something that is limited by your culture – I think that all ethnic groups buy into it along with the massive advertising.
Even the one area where I the argument might have some validity I find some problems with:
The cultural obligation to the extended family is a big factor for both blacks and Latinos. Whatever income there is ends up going to help elderly parents or sent to family back in the home country.
While this is a difference from most white families, it isn’t any different than the cultural obligations for families of Asian decent – and these groups have some of the highest saving rates in the world. This again makes me believe it’s more of an educational issue – and Latinos and African Americans may have a more difficult time finding the resources to get the financial education than their white counterparts.