In this post I’m going to reveal the Chinese secret to saving money. Now, I’ve gotten a lot of these money saving tips from my dad, who’s your typical good-with-money Chinese person, and I want to share with you those today. People sometimes will ask me if I’m half Asian, but I’m actually 100% Chinese. My mom is from Beijing, my dad is from Shanghai, and I’ve done many trips to China including two six-month stretches both in Hong Kong and in Beijing and many trips in between. So sit back, nihaw, women’s.
The most stunning fact about the Chinese is that in China, the gross savings rate there is 45.9% as of December 2021. That means on every hundred dollars that they bring in, they’re going to be saving roughly 46 dollars of that. Contrast that to the United States where we have a heavy focus on consumption. In this country, our savings rate is typically between 3.5% and 5%. So what’s the reason for this big disparity? I mean that’s almost a factor of 10 that we’re talking about here. So why are the Chinese so good at saving money?
First Reason: Cultural Factors
It’s definitely cultural. Us Americans are always being hit with sales, discounts, financing options, and the like. “80% off clothes! Come on in and I’ll give you a free quote!” We’re always kind of pressured to keep up with our neighbors. “Is this car fifteen thousand dollars? Yeah, it is.” Now, a lot of this originated after the post-World War II era. It was not long after the Great Depression, and it was deemed patriotic if you were to consume in America at that time. So they were trying to spur the economy on. I encourage you all to go shopping more in China—it’s very different. They have a heavy emphasis on saving money because of what money means to them as well as the demographics of their country.
Second Reason: Financial Practices
You’ll also find a heavy aversion to financing things in China. Oftentimes, Chinese people want to buy things fully in cash instead of trying to finance it and take on debt. Now, if you’re just looking for the Chinese secret to saving money, I’m going to leave a timestamp down below so that you can skip to it if you want. However, right now I’m going to cover the ‘why’ as to why Chinese people save money because I think it’s really interesting. If you understand intrinsically why Chinese people want to save money, it can help you save money as well.
What Money Means in Chinese Culture
The first reason why Chinese people like to save money is the meaning of money and what it means to them. As kids, you’re taught from a very early age that saving money is honorable. Kids will often get money in these red envelopes for New Year’s and birthdays, and they are often encouraged by their parents to save it. This money is referred to as “lucky money.” Now, money is so important to the Chinese that they even have a phrase during the holidays and New Year’s. Instead of saying “Happy New Year,” they say something else. Let’s listen to Ronnie Chang, the comedian, explain it better than I can:
Even during Chinese New Year, the biggest holiday for Chinese people, the way we greet each other is we say in Cantonese: Gong xi fa cai (pronounced “Gong shee fah tsai”).
This means, “Hope you get rich!” That’s not “Happy,” that’s pretty funny because it’s also true. You can also see the importance of money in the way that people in Chinese society treat other people with a lot of money. People with a lot of money in Chinese culture are deemed successful in many people’s eyes, and so it’s often viewed as a good thing to have a lot of money.
Chinese Demographics
Up until 2016, China actually had a one-child policy. This was implemented in the late 70s and early 80s to stem overpopulation. This means each family could have one child, and if you had more than one, you would be slapped with a fine. Additionally, if you didn’t pay that fine, your household wouldn’t be able to register your second child’s name in the household system, so your second child would not be eligible for healthcare services and other services like education. Naturally, this one-child policy created a sharp decline in newborns.
Retirement and Savings Concerns
Another reason for saving in China is that there’s no 401K, no IRA, and no retirement accounts that Chinese people can contribute to. Rather, they do have a pension system, but still many people in China are wary that the pension system will still be around when they retire. They also worry about the cost of healthcare, education, and their own pensions.
The Chinese Secret to Saving Money
The main secret as to why Chinese people are brilliant at saving money is not anything crazy. It’s just that they have every dollar accounted for. In my particular case, my dad would always know where his money was going at all times. There is a special budgeting system called the zero-based budgeting system.
Zero-Based Budgeting
The zero-based budgeting system is a method in which you budget where you spend every last cent of your monthly income so that your amount left at the end of every month is equal to zero. So, that means your income minus your expenses equals zero at the end of the month. Expenses in this case also include savings, investments, paying off debt, etc. Let’s pretend you make four thousand dollars a month. A zero-based budget might look like the following:
- Rent
- Groceries
- Necessities
- Savings (Emergency Fund, IRA, Student Loan Payments, New Car Fund, etc.)
By the time that you get to the end of your budgeting, you are left with zero dollars at the bottom. This is essentially the zero-based budgeting system, where all dollars are accounted for.
Other Tips and Habits
- Don’t indulge in luxury goods or status symbol products.
- Live off a small percentage of your income.
- Focus on needs vs. wants.
- Stay at home and eat at home to save money.
I hope some of these tips will inspire you to save. If they did, please let me know in the comments! And as the Chinese would say during New Year’s, Gong Xi Fa Cai which means, “I hope you get rich!”
