It’s all in the family

To understand how Asian Americans view money, first understand how they view their families

The Asian American population is the fastest growing ethnic group in the U.S. and by mid-century it will likely be the largest, according to projections from the Pew Research Center. Asian Americans are also one of the wealthiest ethnic groups, as their median income is 43% higher than the national average. That’s a lot of money ripe for stewardship and growth. But to effectively do the former to maximize the latter, it’s important to understand how capital moves between generations in Asian American families.

That means taking a close look at the values, habits, and traditions of how Asian cultures tend to view money and family, how they differ from those of non-Asians, how they differ between Asian cultures, and how they differ between Asian American generations.

But if there’s one word that could sum up how Asian Americans view money, it’s family.

From generation to generation

“In terms of money, we’re a very family-centric culture,” says James Huang, owner of EA Insurance and Financial Services, and president of the Asian American Insurance and Financial Professional Association. “I guess I speak for Chinese Americans, but I probably could extend that to other Southeast Asian or Asian cultures: We make sure that what we do will leave something for our future generations.”

"They have that mindset: ‘I can live harshly, it’s okay, I’ve done that. But I want to make sure my children don’t have to go through that.'”

In practice, this determination means a lot more than putting a little extra aside for the children—there’s a huge difference between how Asians and non-Asians handle their income. According to a report by Prudential Financial, Asian immigrants save or invest 47% of their income, while Asian Americans born here save or invest 37%. The U.S. average for that kind of savings? 10%.

In the world of insurance, the drive to save, and the family-centricity Huang speaks of, has a direct impact on the kinds of policies that Asian Americans buy.

“Many young professional Americans buy term life insurance,” says Fred Huang (no relation), managing director and financial advisor at Forest Hills Financial Group, with a focus on the Asian American community. “But it’s difficult with the Chinese American or Asian American market because they see it as a waste of money. They would rather save—they love saving money.”

Chinese American immigrants typically choose permanent insurance, especially if they came to the U.S. in the 1980s or earlier, despite the extra cost. “They’ve had a hard time themselves, trying to make a living and trying to survive, and they want to make sure that their children, and their children’s children, don’t have to go through the same thing they did,” says James Huang. “So they have that mindset: ‘I can live harshly, it’s okay, I’ve done that. But I want to make sure my children don’t have to go through that.’”

That can translate to pretty large policies. “It’s a fair statement that the size of our policies typically are bigger than average,” says James Huang. “I’ve come across policies that are, you know, $10 million, $20 million, $30 million, $40 million.”

Using cash may not be the best

The practice of paying a little now so that relatives can have something later doesn’t flow in only one direction. Where non-Asians typically have only their spouse and children as beneficiaries, Asian Americans will often add their parents. “I have mothers that will buy policies on themselves, where the parent has 50% and the children have 50%,” says James Huang.

"The children are the retirement plan."

As much as Asian Americans want to save what they earn, they want to avoid debt. “Socially, people think that if you’re borrowing money, you’re not successful,” says Fred Huang. “So borrowing money in our culture, in general, is in a kind of emergency situation.”

Cars and even houses are often purchased with cash. And when borrowing is needed, recent Asian American immigrants are more likely to go to friends and family than an institution. “Because when they see the accrued interest, that’s cash outflow, and they see their total price has gone up. They sometimes don’t have this understanding of what we call a present value, of cash flow, and they are not familiar with many other investment vehicles,” says Fred Huang. “So this is an area where I think we have an opportunity to educate in the United States. Using cash only to conduct your financial life may not be the best.”

Making money grow

A focus on socking it away is at least as strong in the Indian American community as it is among Chinese Americans. “The Indian mindset is about saving, investing, making money grow,” says Vikrant Saxena, an analytics officer at Global Atlantic Financial Group. “We need to make sure our kids have enough money when they go to college or are ready to get married. We want to make sure we don’t burden them with all those loans.” And, similarly, the flow of capital can go from younger to older generations. “When you are in U.S. and you make money in dollars—and you save money in dollars—because of the exchange rate, that’s a lot of money back home. So we send money back home to support our parents.”

Ironically, the relative hardships of the older generations cause some members of the younger professional class to change their monetary habits to focus a little more on themselves. “We are also like, ‘Okay, we don’t want to be at a place where our parents are, needing money from our kids.’ So that’s why we, as Indians, are very focused on saving money and having a very good retirement.”

And, as they become more accustomed to life in the U.S., they are a little more willing to live—and spend—in the moment. “The trend is changing,” said Saxena. “I see a lot of younger Indian Americans driving BMWs and other luxury cars. But I would say the majority still think that if they can get from point a to point b with any car, why spend money on luxury.”

Children are the retirement plan

For Vivian Jin, vice president and client service director, Asian American Specialty Practice, at HUB International, the cultural exception that children will take care of their parents is a little more explicit. “In Western culture, at a very young age, you are somehow taught to think about your retirement—and that’s probably because there is minimum expectation for the children to take care of their parents as they are getting older,” she says. “In Asian culture, it’s completely the opposite. Especially with the Asian families that emigrate from their countries to here, looking for better opportunities, and a better life for their children. Our parents worked extremely hard to provide for their children and that doesn’t allow our parents to have a lot of savings for their retirement.”

The children are the retirement plan. And for Korean families there’s one child that fits into that equation. “Within the Korean culture, specifically, parents expect their elder, or the oldest son, to take care of them when they get older. So, naturally, the parents’ money, most of it, would go to the oldest son in the family. That’s how it’s been culturally, historically,” says Jin. “And if you’re a daughter, chances are that you’ll probably not get any of it. Because the parent’s expectation is that well, you’re going to belong to another family after you get married. So basically, you’re no longer part of our family.”

If there are siblings to take care of, it’s expected that that eldest son will be in charge. That “creates a lot of tension and resentment between siblings.”

In Korea these tensions are pushing many women to avoid marriage altogether, likely leading to a huge drop in the population in the future. But in the U.S.—among some Korean families—those strictures are loosening. “It has evolved here in America, with the blend of the Eastern and Western cultures,” says Jin. “Because if you go through that yourself, especially if you’re not the oldest son in the family—for example, I am the youngest daughter—you want to make sure that your kids are getting it equally. I think it all depends on the family’s culture.”

In general, Jin sees Korean American millennials and GenZers putting more of their money away in their own savings accounts and retirement plans. “That’s why a lot of the younger people who have full time jobs, they get a side hustle or freelance or whatever, and try to make that extra income so that they can put it aside for early retirement,” she says.

“And I think that’s a great thing.”