Our great nation was founded by successive waves of immigrants, each of whom contributed their ambition and talents to create a better life for themselves, their families, and our nation as a whole.
That hunger, the drive to seek a better life in a new land, often makes immigrants inclined to work hard in search of new opportunities. It's the sort of grit and dedication that leads people to better financial outcomes – statistics prove it.
On at least two key measures of immigrants' financial performance — their rates of entrepreneurship and how much debt they hold — foreign-born workers out-perform native-born Americans.
The 2017 Kauffman Entrepreneurship Index shows that immigrants are more entrepreneurial than native-born Americans. Every year from 1996 to 2016, the pace at which immigrants started businesses outpaced U.S.-born individuals two-fold. Whether it's your corner mom-and-pop taqueria or a Silicon Valley start-up, immigrants are engaging in entrepreneurship more frequently, and often succeeding. According to the non-partisan Partnership for a New American Economy, over 40% of Fortune 500 companies had a founder who was either an immigrant or the child of one.
Another key measure of financial strength at which foreign-born Americans outpace the native-born: Immigrants use credit less often for purchasing cars, homes, or starting businesses. This results in significantly lower levels of indebtedness than native-born Americans. For example, a Pew Research Center study shows that 34% of foreign-born Hispanic Americans report no credit card or installment loan debt of any kind, as compared to just 19% of the general population.
Immigrant values and habits
The values and habits these new Americans bring from their own homelands help explain some of this success.
Unemployment in the formal sector tends be higher in developing countries, requiring more people to become entrepreneurs. Credit is also scarcer in most developing countries, requiring individuals to save more in order to afford their goals. Or, they often pool money among friends and family (rather than borrow from financial institutions) to reach financial goals. That means less debt and potentially better credit outcomes when they reach the U.S.
What does that teach us?
First, formal credit isn't a prerequisite for success: You can start a business, buy a car, or attend college without the attending debt or loans. It may require saving longer, working harder, or choosing cheaper options, but avoiding debt doesn't necessarily mean you'll have to do without these things. And the benefit is that you'll avoid paying interest, potentially saving thousands in the long run, and freeing your financial future from the shackles of debt. (Always consult a debt repayment calculator first to understand how much a loan will really cost you, such as this student loan calculator from Sallie Mae.)
Second, consider the role alternative forms of credit can play in your life, such as borrowing from friends or family, or inviting them to pool resources with you to start a joint business. Though it's not an option available to all of us, asking loved ones to invest in you directly can be the best gift you'll ever get. Or consider options such as lending circles, a pooled borrowing format in which community members contribute into a shared pool of monies from which each can borrow. (Some of these programs also enable individuals to build better credit scores.)
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Finally, take a hard look at the formal economy and what traditional jobs offer. Though things like formal benefits, career progression and a stable salary can be difficult to forego, it's also true that entrepreneurialism yields its own benefits in the form of ownership, professional freedom, and potential returns. Examining your skill sets, and determining whether these can translate into a new venture (even part-time), can be a valuable exercise in self-discovery.
The beauty of our country is that the flow of culture and opportunity spreads both ways: the strength of our economy and financial system benefits immigrants, but many also bring prudent financial habits and ambition from which we can all benefit. It is the combined contributions of both native-born Americans and immigrants that have created the American Dream for generations before us, and for those yet to come.
—By Janet Alvarez, financial journalist
Janet is the daughter of immigrants and born in Texas. Her mother immigrated to the U.S. from Colombia, and her father immigrated from Jordan.
Check out Ryan Serhant of 'Million Dollar Listing': 4 questions to ask before you buy a home via Grow with Acorns+CNBC.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.
