For too many, the American Dream feels like a dream deferred.
The harsh reality is that more than half of all Americans (57 percent) struggle to manage their day-to-day financial lives, according to the Center for Financial Services Innovation (CFSI). That’s 138 million people who aren’t thinking about saving, investing, or retirement planning because they’re just trying to get by until their next paycheck.
The most financially vulnerable of all U.S. residents are the foreign-born. One reason is that language barriers are an impediment to financial literacy. Fortunately, banks, lenders, and other financial institutions have access to solutions that can be easily implemented to help limited-English speakers overcome these obstacles and achieve better financial health.
Here’s a look at what financial health really means and what financial services firms and organizations advocating financial literacy can do to foster it among multicultural consumers.
Key Elements of Financial Health
Financial health is characterized by a person’s ability to manage money in a way that allows them to be protected from an unexpected crisis and plan ahead to improve their position. Key elements of financial health include:
- Smooth and effective management of day-to-day finances, meaning a person pays bills on time, has an acceptable debt-to-income ratio, and feels confident in their ability to meet short-term financial goals.
- Resilience in the face of inevitable ups and downs, including having adequate savings, insurance, and other safety nets.
- The capacity to seize opportunities that lead to financial security and mobility, meaning they are saving and investing to meet long-term goals, including retirement.
The CFSI conducted a survey of more than 7,000 U.S. residents and segmented them into three groups based on their financial health. Here’s a look at what they found:
- 43 percent were considered financially healthy, meaning they fell within a spectrum of being at least financially stable and, at best, thriving.
- 28 percent were considered financially coping, meaning they were either striving toward achieving stability or getting by but failing to budget and save regularly.
- 28 percent were financially vulnerable, meaning they were either not actively engaged in their personal finances or living paycheck to paycheck with no margin for the unexpected.
The Impact of Financial Literacy on Financial Health
Financial literacy requires an understanding of how money works in the world and access to resources that can help individuals make better decisions about their finances. Understanding financial concepts like compound interest is difficult enough when you were born in this country and speak English. It’s even harder when there are language barriers, especially if you come from a country with very different financial institutions (and traditions) or you avoided those institutions entirely due to trust issues.
It should hardly be surprising, then, that the CFSI identified foreign-born individuals as being the nation’s most financially vulnerable group. Language barriers were a key component of this dynamic.
Many foreign-born individuals fall into the 9 percent of U.S. residents (more than 25 million people) who are limited-English speakers, meaning they speak English poorly and have difficulty reading the language. Loan documents, disclosures, and investment statements are challenging to comprehend in one’s native tongue; imagine having to digest this financial information in a foreign language.
How Financial Institutions Can Reduce Language Barriers
Being able to overcome the language barrier can go a long way toward improving understanding for financial consumers with limited English proficiency. When a customer can speak to someone in his or her own language at a bank, for instance, they will be more likely to understand services and how to access them.
Here are a few ways financial institutions are using language services to break down barriers and improve financial literacy.
- Maximizing use of front-line bilingual staff to connect directly with consumers. Ensure staff members’ foreign language skills are sufficient to discuss financial services through language proficiency testing.
- Having professional phone interpreting available at all consumer touch points, including retail locations and call centers, to support ad-hoc needs in the broadest number of languages.
- Using video remote interpreting to have face-to-face discussions with bank personnel or a lender when qualified bilingual staff or an on-site interpreter isn’t available.
- Using language translation and localization services to give ATM users prompts in their own language.
- Translating important documents, such as product and service information.
- Undergoing website translation and localization to allow customers to find what they need quickly and easily, as well as offering educational resources to enhance understanding.
- Using on-site interpreting for community outreach, such as hosting an educational forum for a specific population and encouraging people to open an account.
LanguageLine Can Help
Just as people cannot attain physical fitness without basic knowledge of what works and a commitment to doing it, they cannot be financially healthy without financial literacy. And language access is an important part of that.
LanguageLine Solutions offers comprehensive language services that can help financial services firms and those promoting financial literacy to enhance communication at the most critical touch points, whether it is to send a remittance or to set up a savings account that will provide a more secure financial future.