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May 17, 2021

Creating Financial Wellbeing for Asian Americans

By Jackie Lam

Cultural differences may affect spending and investing behavior.

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When people think of Asian Americans, stereotypes of highly-educated white-collar professionals living in relative affluence, driving nice cars and living in safe suburbs may come to mind. These are often supported by characters in blockbuster films such as Crazy Rich Asians, depicting families of extreme wealth and extravagance. 

The reality looks quite a bit different, and it’s something worth reflecting on as we celebrate Asian American and Pacific Isalnder Heritage Month in May. It turns out there’s a significant wealth gap between Whites and Asian Americans in the U.S., with the former earning approximately 15% more than the latter according to research from Yale University. And income economic inequality is actually greatest among Asians than any other group in the U.S.

While it’s not entirely clear why the income gap is so huge among Asians in America, it may be related to the group’s diversity: There are 23 million Asians in the U.S. representing more than 20 countries. 

For starters, almost a third of Asian Americans in the U.S. live in multigenerational households. Since income data is typically collected according to households, income might appear higher among Asian American households in the U.S. than a single-family one, says Pamela Capalad, a certified planner and CEO and founder of Brooklyn, N.Y.-based Brunch & Budget. That income might include a grandparent who receives Social Security benefits, and a teen who has an after-school gig, points out Capalad.

What’s more, many Asians come to the U.S. so they can send money home to support their families. So while they might make more, their wealth might be less. Last, the education levels among Asians vary greatly in the U.S.

“There are a lot of Asian Americans who came here as professionals, and there are a lot of Asian Americans who came here as refugees,” Capaland says.

And with that in mind, the financial planning needs of Asian Americans may be different and more complex than for other groups. Spending behavior and cultural differences may play a role in how Asian Americans can narrow the income gap and build generational wealth. 

Here are some things to consider:

Create a savings account specifically for the family. There is often an expectation in Asian American families to help aging parents or relatives who need financial assistance. Creating a family savings fund can help protect your own financial health. “When you’re a first generation with a professional salary, and your parents are immigrants, you’re most likely in that in-between generation of needing to take care of the generation before you,” Capaland says.

She recommends creating a savings fund just for your family, and unexpected family expenses, and making it part of your budget. That way, you won’t be caught off guard, and you won’t be eating into your own attempts to save and invest.

Know where homeownership fits into your financial goals. Asian Americans typically favor the idea of buying a home and real estate, says Danqin Fang, a senior financial advisor at the Coral Gables, Florida-based wealth management firm Evensky & Katz/Foldes Financial. It might be because it’s a tangible item that represents security, and there might be pressure from parents to purchase a house. Asian Americans typically think of homeownership not as an investment that you buy and sell in a few years, says Capalad. They tend to think of buying a “forever” home, something you hold onto for 40 or 50 years, then pass along to your children. If that’s the case, think about how that plays into your financial plans, and consider other investment opportunities.

Get hands-on with your family’s estate planning. Among the Asian American community, there tends to be a cultural aversion to estate planning, says Andrew Wang, a managing partner at the Mendham, N.J-based financial planning firm Runnymede Capital Management. “Many older Asian Americans especially tend to avoid the topic of death,” Wang says. “Sometimes, it’s superstition. Other times, the younger generation has difficulty bringing up the subject while maintaining respect for the older generation.”

As your parents’ financial plans can greatly affect your own, make sure you’re familiar with your parents’ financial planning strategy. “You have to have your own estate plan in place,” says Capalad. “But let’s also make sure your parents have one.” Otherwise, after your parents’ pass, their assets could get lost in an abyss of probate court and legal fees.

Learn about investing. While it’s baked deeply in many Asian Americans to “save, save, save,” sometimes it’s not clear what one is exactly saving for, or why they need to save, says Fang. Once you’ve got your rainy day and emergency funds all set, then it may be time to put your money to work. A good place to start is to learn of ways you can build wealth, for example by investing, instead of letting money sit in a bank account. 

Saving might feel like the safe thing to do, and it’s the thing that’s guaranteed, adds Capalad. “Not understanding the stock market or not understanding what investing is really prevents people from doing that.”

Capaland recommends learning the basics about investing, for example what it means to invest in the stock market, principles of long-term investing, and how investing can help grow wealth over time.With Stash, you can start investing small amounts of money and saving towards your long-term goals.1 Stash allows you to invest in stocks, bonds, and exchange-traded funds (ETFs). When investing, consider the Stash Way®,investing small amounts of money regularly in a diverse portfolio.


Written by

Jackie Lam

Jackie Lam is a freelance writer based in Los Angeles. Her work has appeared in Salon, Business Insider, and GOOD.

1Stash does not offer an interest-bearing savings account.


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