Barriers to Immigrant Use of Financial Services: The Role of Language Skills, U.S. Experience, and Return Migration Expectations

Immigrants constitute a rapidly growing share of the U.S. population. However, when compared to natives, foreign-born residents are more likely to be unbanked, less likely to participate in formal retirement savings programs and have lower levels of financial literacy. This project (1) investigated barriers to the use of financial services faced by immigrants and (2) designed and evaluated new financial education materials targeted at immigrants. The authors focused on three potential barriers: limited English proficiency, lack of U.S. experience and return migration expectations. They designed new financial education materials to help immigrants overcome financial participation barriers. Using the RAND American Life Panel they administered two different versions of the educational material to randomly selected test groups — one general version and one including immigrant-specific information — as well as having a control group that received no information. They find that the groups that received the educational intervention were more likely to correctly answer questions on investment and savings strategies, IRA and 401(k) rules and to perform simple interest rates calculations. When questions involved specific immigrant information, the effect was mostly present for the treatment group that received immigrant-specific content. They find little effect of the treatments on financial behavior measures such as probability expectations and choice tasks. Overall, the knowledge outcomes point to the efficacy of this type of educational material in informing respondents with respect to important financial information that they are not familiar with, including information related to their immigrant status. However, they find limited effect on intended behavior change.