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- The wealth gap remains a harsh reality for women of color, which makes it harder to build wealth.
- Your finances affect your mental health, so it’s important to take care of yourself emotionally.
- Your parents’ finances don’t have to be the baseline by which you judge your experience and needs.
A few months back, I attended a money and mental health session. Presented by the Plutus Foundation, a nonprofit organization devoted to empowering content creators with the tools and resources needed to enhance financial literacy, I sat in on a group chat where we largely talked about how, when you’re a first-generation woman of color, finances can impact your mental health differently. Further, building wealth can also look quite different.
As a first-generation female Vietnamese-American, a lot of what we discussed hit home — and hit hard. I related to the fact that there’s an expectation that you are to look out for your family, and that you inherit intergenerational trauma, which often remains unspoken and a taboo topic.
I sat down with a few financial experts in the space to discuss how trauma influences our money decisions, the connection between money and mental health, and some key differences in building wealth when you’re a first-generation woman of color in the US.
Systemic inequality makes saving and investing harder
The gender pay gap persists. In 2021, Latinas in the US were paid 54% of what non-Hispanic white men were paid. In other words, it would take Latina workers nearly an entire extra year of working full-time to be compensated the same as average yearly earnings of their white male counterparts. Further, Black women workers in the US were paid only 64% of what non-Hispanic, white workers were paid in 2021.
“When we think about our ability to save, invest, and have financial stability, as much as a high income doesn’t guarantee financial stability, it does make it a lot easier if you are managing your cash flow, and for your saving and investment plan as well,” says Anna N’Jie-Konte, a certified financial planner and founder of Dare to Dream Financial Planning. “So when we think about people being underpaid for the same work, it makes it that much harder to build wealth, because as costs increase — as there are costs to live — you have that much less funds to actually execute on that.”
Not sure where to start? N’Jie-Konte recommends getting to a place where you’re spending less than you make. This might involve either raking in more income, cutting back on expenses, or doing both. Then, pay yourself first. “Decide on what you’re going to save and invest on a monthly basis,” she says. Automate as much as you can. N’Jie-Konte is also a big fan of the 50/30/20 budget rule, where 50% of your take-home pay goes to needs, 30% goes toward wants, and the remaining 20% goes toward your debt and savings.
Wealth inequality can affect your emotional health
Being a first-generation woman of color can also impact your emotional well-being, points out Rita-Soledad Fernández Paulino, founder of Wealth Para Todos, and creator of the upcoming podcast of the same name. “You wonder whether you think you belong in certain spaces, and that impacts your self-esteem,” she says. “It could lead to this burnout from overextending and trying to prove yourself, which impacts your wellness.”
Plus, when you’re first generation and you’re in a work environment where you are also the only person of color, it affects what parts of yourself you feel can show up in the workplace, explains Paulino. “When we have to compartmentalize ourselves, it impacts our confidence,” she says. “And it’s an energy lead. You’re dealing with these insecurities about whether you belong in a space and also the reality of microaggressions, like being called ‘spicy’ if you’re Latina or that you have an ‘interesting accent.'”
Internalized trauma affects you in the workplace
For first-generation women of color, many of our parents have dealt with internalized trauma — not to mention coming to a foreign country where you don’t speak the language, aren’t familiar with the banking systems, and have to raise children without a community of people with a village mindset, says Paulino.
“It makes it very difficult on our parents, on their mental health and stress levels,” she says. “But therapy was not accessible to them. So as children of immigrants, you might grow up with that trauma, and the shame or possibly living in poverty with parents who were burnt out. And you internalize it. As a child who was always expected to be responsible or to keep the peace in the household, you might show up that same way at work. And it negatively impacts you.”
While you might not feel comfortable taking care of yourself, one option is going to therapy to find someone who can teach you these skills to self-regulate, Paulino continues. “It’s hard to stop with the people-pleasing and move away from perfectionism and coping mechanisms that serve a lot of children of immigrants.”
5 things to remember about building wealth
1. Make the most of employer benefits
If you’re the first in your family who has access to employer benefits — think a retirement account, flexible spending account or health savings account benefits, or paid sick days — these are perks your parents might not have had access to. In turn, your parents might’ve been more prone to burnout, explains Paulino.
“I’ve seen parents who’ve had to trade their time for a dollar,” says Paulino, “and not showing up to work meant that there was going to be a shortage of income. And having a shortage of income means not being able to pay certain bills. So if you have paid sick days, you might not even take them, because you were raised watching parents who always showed up no matter how they were feeling.”
Paulino recommends going beyond contributing just enough to get the full employer match (e.g., putting in 3% if your employer puts in 3%). Ideally, contribute more if you can. N’Jie-Konte recommends contributing 10% to 15% of your paycheck toward your employer-sponsored retirement account. “You might need more, you might need less, but I think it’s a really good overall benchmark,” she says. “Even if you don’t pay that much attention to it, it ensures that you do well financially.”
If your employer offers an FSA or HSA, learn how you can use your FSA to cover childcare costs and how to get reimbursed for eligible expenses. Along the same lines, see how you can make the most of an employer-sponsored HSA.
2. Understand how your experiences affects negotiating at your job
While haggling might be a more familiar concept for children of immigrants, the idea of negotiating a higher salary and asking for better benefits can feel very risky, explains Paulino. That’s because there might be this underlying fear creeping in that your employer might choose someone else.
“A lot of children of immigrants feel that the salary that their parents have is their baseline,” says Paulino. “Anything above the baseline of the parent is like, ‘Oh, I make good money,’ and your parents will tell you that you make good money if you make more than them.” Instead, Paulino recommends doing your research to know what the pay is across the board, and learn the value you bring to the table at your workplace.
3. Understand how familial caregiving expectations can affect your finances
For many first generation women of color, there’s an expectation to financially or physically care for both their parents. That’s on top of juggling a career, managing your money, and having agency with your finances.
“While the career and earning trajectory for all women can be interrupted or stagnated when they have children, it can be exacerbated for women of color,” says N’Jie-Konte. “That’s because we’re caring for your children, parents and grandparents — and managing our own life.”
And if you’re part of a culture where interdependence is valued, there’s a focus on helping one another, adds Paulino. “The benefits of that is that you might get some free or reduced childcare,” she says. “But you’ll also need to tend to your parents, who haven’t been thinking about investing for retirement, because that money was so often used in your childhood.”
To balance your financial goals and needs with helping your family, Paulino recommends what she calls a “loved-one emergency fund,” which is cash you stash away to help your family. “If your brother is going to call and tell you, ‘I have a flat tire, I need help,’ if you know you’re going to send them the money anyways, then make sure you have a loved-one emergency fund. If, you know, if your mom calls you and says, ‘I’m short on rent,’ that you’re going to make sure to give it to her, then make sure to have that money there.”
Paulino suggests figuring out how much you want to have in there, who gets access to that money and how much, and under what conditions. “Because even in cultures that value interdependence, we can have boundaries, so that we have interdependence, and not codependence.”
4. Mind the knowledge gap
There’s a fundamental gap in financial literacy and money management know-how, explains N’Jie-Konte. Besides being first-generation, you might be the first to attend college. You might not have been exposed to building wealth, the tenets of investing and paying taxes, and basic financial planning.
“Recognize that the gap exists, and don’t spend too much time shaming yourself for that gap or getting despondent and not taking action because it’s too overwhelming and it’s too scary,” says N’Jie-Konte.
5. Don’t worry about getting it perfect
For first-generation women of color, it starts with learning more and doing more. Sure, you might have a steeper learning curve and more hurdles to leap over, but don’t spend too much time quibbling over this reality and judging yourself for your lack of knowledge, says N’Jie-Konte.
“Don’t expect perfect action, and don’t get caught up on the time you missed, the time you wasted, or how your parents could’ve done better,” she says. “None of that serves you. You’re going to make mistakes and you’re going to trip along the way. But what serves you is putting one foot in front of the other.”