In a new study from Rui Yao, a professor in the University of Missouri School of Human Environmental Sciences, and published in the Journal of East Asian Studies. Yao found that a most Chinese American households do not save enough of their income, but instead they invest most of their net worth in the stock market.
For her study, Yao used the emergency fund ratio, which refers to how many months a household could continue living at its current lifestyle if they stopped receiving income. Financial experts suggest saving at least three months of income, but Yao found that a majority of Chinese Americans are not meeting this guideline.
“Less than 50 percent of Chinese Americans meet the emergency fund ratio guideline, but Chinese Americans are also investing more than average,” Yao said. “Everyone should have an adequate emergency fund in place before thinking about the stock market.”
Sadly Yao’s conclusions also applied to my parents when they were living. Whenever they had any available savings, it was invested in the stock market. To my parents investing in the stock market was saving money, and they really didn’t see a difference between money in stocks and money in a savings account or CD. In the end they lost more than they ever made on a stock.
As I’ve approached financial maturity I’ve been able to save enough to have an adequate emergency fund in place, and I’ve made sure that fund isn’t invested in stocks. Yao’s solution to the Chinese American savings dilemma? Education. She feels that Chinese Americans need to be educated on the value of real savings. That’s especially true in an economic climate like the one we’re in today.