Finhabits, a financial technology platform that more than 680,000 U.S. Hispanics use to invest and access financial education, has released a new report on Hispanics’ growing wealth and investing behaviors. The report, “Power in Numbers: The $113 Trillion Unseen Hispanic Wealth Opportunity,” offers an in-depth look at the impact of the country’s fastest-growing demographic on the financial sector, as well as its own financial well-being. The complete report is available here.
Hispanics currently represent nearly 20 percent of the U.S. population. Over the last 10 years, their household wealth has grown at an annual compound rate of 12.5 percent (compared to 6.8 percent growth among non-Latino Whites). At this rate, Hispanics are on track to reach $113 trillion in collective wealth by 2050. By comparison, the total household wealth in the U.S. in 2022 was $140 Trillion.
According to the new report, Hispanics’ growing adoption of micro-investing options are fueling this collective wealth. These small, regular and often automated digital deposits into public market securities, such as stocks or bonds, mark a departure from a reliance on home and business ownership as a path to wealth.
“Over the next several years, we’ll see this 20 percent of the population influence the way 99 percent of Americans bank,” says Carlos Garcia, CEO and founder of Finhabits. “Tech-enabled investing, in particular, will pave the way for a ‘power in numbers’ approach to their wealth accumulation and financial gain. In order to tap into this significant growth opportunity, banks and financial institutions will have to innovate on legacy investment models built for the top 1 percent.”
Highlights from the report include:
- Micro-investing is driving Hispanics to contribute up to 6.5 percent of their total income to retirement investments. This is compared to 5 percent of income contributed through other approaches. By investing as little as $50/week into Finhabits accounts, Hispanics are redefining the way they–and other Americans–will grow their long-term wealth.
- Between 2020 and 2040, the majority of new homeowners will come from the Hispanic community, adding 4.8 million new Hispanic homeowners. Across Finhabits’ user base, Hispanics who own homes make 2.7 times more than non-homeowners, making them not only a fast-growing audience, but also an attractive one to the financial sector.
- To maximize their wealth potential, Latinos must invest in public market securities, not just homes and businesses. Over the last 40 years, average U.S. house prices have risen approximately 500 percent, while the S&P 500 index grew by more than 2,800 percent. Hispanics who diversify their investments beyond homes and into financial assets such as equities will benefit from this force multiplier on their wealth generation.
“Banks and financial institutions have successfully won over Hispanics in providing basic checking accounts but have not been able to translate this success into winning over Hispanics as they accumulate wealth,” adds Garcia.
For this report, Finhabits analyzed the financial investment behaviors of 90,000 investment clients who contribute to Hispanic wealth creation. The company’s analysts based their financial projections on publicly available census data to identify trends in retirement, savings, home ownership, and Hispanic-owned businesses.