Chinese Americans Favor Risky Investments Over Savings

By Tim | Thursday, February 24, 2011 | 8 Comments

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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.

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Facebook Comments (Beta)

raymonst

heh.. i’m the opposite. i didn’t touch the stock market until my savings were up to par. even now i’m still a little skittish about stocks.
Danny_Ahmed

Maybe it’s just me, but I don’t really buy this study.
timat8asians

@Danny_Ahmed I think it depends on the generation. I think the older generations viewed stocks as safe, and not the risk that the younger generation has witnessed.
Danny_Ahmed

@timat8asians I guess. lol, it could be just the people I know.
For a while, a lot of my Chinese American relatives and friends are investing in property. Others have some complex plan with their money, like it’s not into stocks but something else which I’m not entirely sure.
Boogerhead

Are we talking about people reflected in Children of Invention? The Chinese immigrants I grew up with didn’t have extra money to GAMBLE on stocks. My father was ripped off by his more educated financial advisor and never touched stocks again. Now that I am older, I have no belief that stock prices are reflective of actual value. In the 90s, stock peddlers began to infiltrate Chinatowns and some more fortunate (the minority of immigrants) would spend their day in those offices watching the ticker whilst local bank branches failed to advise their customers of the lack of FDIC protection when promoting mutual funds and other investment vehicles.

There are the type of Chinese I know that can’t bear take a chance with the very little money they have eaked out of their English illiterate existence in America and then there is definitely a toxic type regardless of economic background that who would definitely gamble to chase the dragon of outsize wealth not only because they find their present circumstances unbearable but their crab mentality won’t let them accept that some immigrants or fellow Chinese are simply more successful – that it takes all kinds to make the diaspora. Unlike the Chinese friends who babysat me, they’re not happy with steamed egg and salty fish for dinner. They fantasize that someone else is eating some fairy peaches and drinking nectar with the Chinese gods and Hu Jintao on alternate weekends. They self destruct no matter how much more fortunate they are than other people. And those are the ones who WOULD be mean to the rest of us if they were more successful so when they fail, no sympathy.
timat8asians

@Boogerhead Traditional Chinese people believe in luck. They believe if they’re lucky, they will get ahead, make money, etc. That’s why so many of them are willing to go to Las Vegas and gamble, even though they might be intelligent and hold graduate degrees that would make you think they are more rational. I think it’s these same types of people who risk money in the stock market. They think they’ll be lucky and find the right stock. I know my parents were certainly in that category.
Danny_Ahmed

@timat8asians @Boogerhead I hope someone can do a throughou study on Chinese people (in America) and gambling. I understand it’s very prevalent and sometimes it can be a problem. However, and this is just my opinion, I really think that probably only half or less than half of all Chinese Americans are into gambling. There might be a lot of Chinese who gamble, but it doesn’t really mean we all do, or the majority does. Also, most Chinese gamblers are not the whales you hear about in the news or the sad stories of the unlucky ones who literally lose everything. It’s mainly something to pass the time, and many people make small bets.
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