Immigrants’ Access to Financial Services and Asset Accumulation
This paper explores three broad areas that influence immigrants’ wealth accumulation and decisions to participate in various financial markets, relying primarily on data from the 2001 Survey on Income and Program Participation. Consistent with models of savings behavior, socioeconomic and demographic characteristics like age, education, family structure, ethnicity and income play an important role in immigrant as well as native-born choices regarding financial services. These characteristics are only part of the story, however. Immigrants are less likely to participate in a broad array of financial markets compared with the native-born, even after taking into account differences in socioeconomic and demographic factors.
A second goal of this study is to examine the role of immigrant adaptation in shaping financial market behavior. To accomplish this, we investigate characteristics that capture the extent to which immigrants have adapted to life in the U.S. We examine how time spent in the United States, age at migration, language barriers, intentions of returning to their native country, remittances sent to support family members abroad, an orientation toward country of origin institutional norms, legal status and the tendency to cluster in neighborhoods with other immigrants from the same country shape the financial choices of immigrants. While there is some evidence that immigrants are as likely otherwise similar individuals who were born in the U.S. to own a checking account if they have spent enough time in the U.S., adaptation is less complete for financial products that look to the future: savings accounts, IRA/Keogh accounts and stock and mutual funds. The findings also suggest that for immigrants the desire to purchase a home may interact with other financial decisions in a way that accounts for some of the differences in financial market participation for immigrants relative to the native-born.
Finally, it is important to recognize that immigrants financial choices are influenced by the features of products and services offered by banks compared with those offered by the alternative financial services sector, including: cost, anonymity, documentation requirements, minimum balance requirements, and convenience – both in the United States and, in the case of remittances, in the country of origin. Less tangibly, but of enormous importance, the “culture” of the institution determines how welcoming and familiar it feels to a potential immigrant customer. Many of these factors also influence the financial decisions of low- and moderate-income individuals who were born in the United States.