Why do immigrants save so much more money than you?

http://www.iwillteachyoutoberich.com/blog/why-do-immigrants-save-so-much-more-money-than-you-do/


http://www.fatwallet.com/forums/finance/996936/

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Why do immigrants save so much more money than you?
December 6, 2009 · 107 comments

Why has “Raj,” an immigrant who’s lived in the USA for 10 years, saved $150,000 in cash, while few of us born here would ever be able to do the same?

I’m fascinated with the differences in how people around the world spend and save money. Having grown up around a lot of immigrants, I can tell you that their spending patterns are wildly different than people who were born and raised in America.




I was reminded of this a few days ago, when I got this email from an immigrant — let’s call him “Raj” — who’s been in the USA for 10 years.

“I live here in Fremont now and I have about $150K with me in my bank, most of it stored away like that for more than 1 year now because I needed it to buy a house. Now I have stopped thinking hard about the house, since I still dont know where I will settle down, especially after reading your book to avoid buying a house as an investment. I have started diverting most of the money to LifeCycle funds and I also opened an IRA.

In my case , as a Immigrant I still send a lot of money to India where somehow I have good contacts and usually earn much much more than 8% on my money. That is a strong reason I never bothered to learn about investing here. But now I am diversifying and investing both in the US and in India.”

This is extremely common, especially in the Bay Area: You get a single, highly skilled guy who moves from India to a well-paying job in the US. He works his ass off, lives in a small apartment, and sends some of his income back to his family in India. In a few years, he’s saved well into the 6 figures, at which point he either (1) goes back to India to find a bride and returns to continue working, or, less commonly, (2) moves back to India with a nice bit of cash.

This got me thinking. Why do immigrants save so much?

A few easy reasons come to mind:

■They’re more educated (see the Wikipedia entry on Indian Americans)
■They earn more (another Wikipedia link)
■Their culture encourages higher savings rates (see this Atlantic Monthly article). Culture is also why some immigrants are stereotyped as being poor tippers…which is often very true.
I’m especially interested in the cultural factors that affect financial habits. Here’s a fascinating one I didn’t know about from University of Michigan Retirement Research Center (PDF link).

Data from the EBRI Retirement Confidence Survey indicate that Hispanic-Americans who immigrate to the U.S. exhibit different savings behavior than other Americans.

They tend to save more for short-term goals such as education or a home purchase rather than retirement, and are extremely risk averse, placing greater importance on safety than rate of return on investments, relative to others (Kamasaki and Arce, 2000). In addition, they are more than twice as likely as natives to have provided financial assistance to family members (both in and out of the U.S.) and they are more likely to expect their retirement years to be financed by income of other family members (Kamasaki and Arce, 2000)…for many households these intergenerational transfers may be a major component of retirement saving and planning.

If you can’t understand those words, please go find an immigrant and ask him to translate for you.

I’m sure there are several other reasons that are far more complex. We’ve read the New York Times article on how obesity can be contagious, and I’ve long since argued that personal-finance behaviors are contagious, too — suggesting that maybe you should spend time around immigrants so their financial habits rub off.

In your experience, how do spending patterns differ between immigrants and (native) Americans?

Personally, I remember growing up and taking roadtrips to LA. With six of us, lunch at even a fast-food place would be expensive, so my mom packed lunch and we’d stop somewhere to eat it. We never had a summer home — the whole concept was foreign to us. We never had the most fashionable clothes, but my parents would spend a LOT of money on activities for my siblings and me, and didn’t bat an eye at an SAT prep course that cost thousands of dollars.

Like I said, immigrants have incredibly different spending patterns than most of us. What’s your best example of the difference in financial behavior between immigrants and (native) Americans?





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There's your answer...most immigrants live a very modest/meager lifestyle which is 100% different from the average American who blows their money on all the latest crap.

We were all immigrants at one time or another. Think back to your grandparents or great grandparents and see if you remember them living a very frugal lifsetyle and saving. Thats what todays immigrants are doing. Their children and grandchildren, however, are likely to become the free-spending assimilated Americans too.


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Pam December 6, 2009 at 8:48 pm
As a first-generation Indian-American, I totally agree with the differences…and I can say one reason is that (not even kidding) my mother STILL mentally converts from dollars to rupees when determining whether or not to make a purchase!!! Despite living in the U.S. for nearly 30 years, she still does this!

Perhaps because immigrants often return home to visit their relatives and they’re reminded of the vast contrast between their home country and the U.S. We’ve all heard the “I came to this country with two suitcases and $100 in my pocket”, and luxuries such as vacation homes and nicer clothing don’t even factor into the equation.


. 3 Pam December 6, 2009 at 8:58 pm
I realize I didn’t really answer the question. One difference in financial behavior – and I’m generalizing here, I realize that there are exceptions – is that during the holidays, we don’t go crazy buying tons and tons of gifts. I remember being in middle school and feeling totally left out because all my friends had gotten gadgets and clothes AND hundreds of dollars of money! – and I probably got ONE gift from my parents, in the $20-$40 range, if that. It’s not that we couldn’t afford more, it’s just that it wasn’t seen as necessary.

Even though I felt left out as a teenager, I appreciate that frugality now. I could certainly afford to spend hundreds of dollars on gifts, but we still give one or two small meaningful gifts during Christmas, and don’t get sucked into the huge consumerist frenzy from Black Friday through Christmas!