Cultural Differences in Saving and spending as learned behaviors

Cultural Differences in Saving and spending as learned behaviors

Chia-Li Chien | June 06, 2011

Recently, I was pleased to be one of the panelists for “The Financial Outlook for Women Across Race and Culture In Today’s Economy” by the Women’s Inter-Cultural Exchange. I was delighted to see over 200 participants at Queens University attending this interesting look at this topic.

Here are some of the questions and answers we took during my panel discussion:

Question 1: What are the differences when it comes to money and savings among Asian Americans, Native-Americans, Caucasians and why?

My Answer:

What time does a typical 4-year-old boy typically wake up? I’m sure your answer would be in the range of 6 to 8 am, depending on your own personal experience.

Well, Sam was not an ordinary 4-year-old. One day he was awakened by a loud noise, causing the entire house to shake. Sam jumped up and peeked out the window and saw in the distance village being air bombed. It was about 5 am in the morning. Sam remembered his father had told him just a couple days prior, if something were to happen like this, he must do two things. One, find Grace, his younger sister; two, take care of Grace and run as fast as possible to the nearest bomb shelter.

Luckily Sam remembered what his father had told him, and he went through the entire house to find Grace. In the midst of ciaos, his siblings were running around confused and frightened, but Grace was nowhere to be found. By the time Sam found her, like most typical 2-year-olds, she was crying hysterically and asking for her mommy. Even though he tried to calm her for several minutes, Sam couldn’t seem to get her to calm down enough to carry her. So Sam slapped her twice, looked her in the eyes and authoritatively said, “Climb on my back and hold me tight and stop crying.” She did, holding on to Sam with her arms wrapped tightly around his neck, but did not stop crying.

Now Sam had a second task. As he looked outside, he only vaguely recalled where the bomb shelter was located. Even so, he began to run through the heavy black smoke of the burning houses. The heavy smoke obscured his vision and debris was flying toward him from all different directions. Injured people were in the streets, crying, nervously looking for their loved ones. Even in the chaos, Sam focused on getting to his destination. Meanwhile, Grace, still clinging to Sam’s back, continued to scream loudly into his ear, frightened intensely by the situation.

Sam realized he had to stop to take a break and loosen Grace’s grip too tight around his neck or risk getting choked. Otherwise, he knew he would never make it to the shelter. As Sam rested with his head down, taking in as much air as he could in the heavy smoke, he saw something peculiar, something that looked like a candy. He then looked up and saw a fighter plane dropping the things that looked like candy in wrappers. He noticed a symbol on the fighter plane that looked familiar.

He turned his neck to look at his underwear, which was made out of rice sackcloth, to see that it had the same symbol. He did not know what the symbol was for, but understanding it was the same as for rice, he decided it had to be the good guys now flying above and dropping the small bright objects. As a matter of fact, those rice bags were from U.S. aid, and during wartimes, most people recycled them and made the bags into cloth. Sam happened to have a U.S. flag on his behind.

Sam then said to Grace, ”I think this is from the good people. It looks like candy. If I give you one to hold, I want you to stop crying. We’ll see if it is candy later when we get to the shelter.” It worked. Grace took one and ceased to scream or cry. Actually, the candy-shaped objects dropped from the plane were really aluminum foil shaped like candy in a wrapper. It was a tactic the U.S. used to interrupt communications between the Japanese fighter planes, preventing them from knowing when to drop their next bomb, thus creating a small time slot for people in the village to run to the shelter.

Sam’s real name is Mr. Chien, my dad. He is 74-years-old, and a retired assistant high school principal with two master degrees and four children, including me. Grace lives in Los Angeles today. They visit each other every year. My dad grew up during Japan’s occupation of Taiwan (which was a Japanese colony for fifty years) and during World War II, which ended in 1945 with continued fighting for Taiwan’s independence.

I believe it is war time invasions and hardships like my dad lived through that has shaped the saving behavior in China that is so different compared to the Western World.

According to the Bureau of Economic Analysis, for every dollar earned in the U.S. about 5 cents was saved. In Taiwan and China, for every dollar earned 30 cents was saved. From their past experience, the Chinese tend to believe everything can be taken away at any time. During war, everyone lives in poverty. A 30% income savings rate is average; most people save more than that.

It certainly is a behavior that we learned from our parents at a young age. Then we try to pass on the same behavior to our children. And while our parents never actually told us how or what to save, we observed while growing up how much they watched every cent. Today my parents live comfortably in Taipei, one of the world’s highest cost of living cities. The interest earned from their pensions has sufficed for them to live modestly in this ever-changing world. They have not touched any of their savings or pension principal.

So be conscious of how you save and spend money, because your children are unconsciously learning by watching and taking in your behavior. I don’t think the Chinese are any smarter when it comes to money; it’s simply the experience as a country and culture that shapes their saving and frugal behavior.

Question 2: What is the difference when it comes to money – both saving and spending – in women-owned small businesses?

My answer:

Let’s take a look at retirement savings behavior in small business.

Business owners are more likely to own tax-deferred IRAs if they are older, female, white, non-Hispanic, better educated, and married. Women are more likely than men to own an IRA, while men are more likely to own Keogh accounts and participate in 401(k)/Thrift plans. Some 56% of small business owners have retirement savings accounts. One-third of those who have an IRA don’t contribute regularly or at all.

The IRA ownership rate for business owners is only about 36 %, and only one-third of business owners with an IRA contributed for the 2005 tax year. Less than 2% of business owners have a Keogh plan. Only about 18 % of business owners participate in a 401(k)/Thrift plan.

Small businesses accounted for half of all U.S. private-sector employment. To fuel their small businesses growth, many business owners turn to banks or investors for financing. There are six types of private capitals available to small businesses. However, the majority of small businesses use only 1 out of 6 private capital options available to them. According to the Small Business Administration, 60% of small firms use credit (loans or lines of credit) or use trade credit (from suppliers). This interesting study concluded that minority-owned (Asian, black or Hispanic), located in rural areas, with owners with less experience and less education are unlikely to use any sort of credit (bank or trade) when it comes to financing. About one out of five firms will use both banks or trade credit as a financing tool.

Question 3: What does retirement, business exit or cashing out mean to women business owners?

My answer:

When I was writing my first book “Show Me The Money – Run Your Business like a Prosperous Investor” in 2009, I realized there is very limited statical data about behaviors in running a successful small business. As a result, I decided to conduct a Business Value Drivers Study in July of 2010. I interviewed nearly 60 small businesses in 2 months and found that 72% of the participants believe exiting their business is NOT a priority in business. Some 52% don’t know when they want to retire. (Please keep in mind that the majority of participants have the following characteristics: mostly women, over 40 years old, with more than $1MM annual revenue.) Most owners or entrepreneurs simply don’t have an end in mind.

According to the Center for Women’s Business Research, 39.3% of women business owners will sell to a third party, 21.3% will pass the business on to family members, 3.5% will simply close the business and 17.3% have no plan. And a majority of business owners don’t want to think about an exit. Why? Because 78.8% believe that going into retirement is the trigger point for when they need to begin to think about their exit. Don’t you think it’s a bit too late at that point? Things take time, and you can count on needing about three to seven years to strategically increase the value of your business, regardless of whom the buyer is.


  • March 8, 2006. Stephen S. Roach is chief economist at Morgan Stanley. Fortune Magazine.
  • Personal savings hit a U.S. record of $1.7 trillion. By Zhang Ran. China Daily 01/17/2006.
  • The puzzle of China’s rising household saving rate. Marcos Chamon; Kai Liu; Eswar Prasad. 18 January 2011.
  • Bureau of Economic Analysis, National Economic Accounts. March 25, 2011. Personal Saving in the National Income and Product Accounts (NIPAs). Personal Saving in the Flow of Funds Accounts (FFAs)
  • Small Business Retirement Plan Availability and Worker Participation, Kathryn Kobe, Small Business Administration, Office of Advocacy. March 2010.
  • Bank Credit, Trade Credit or No Credit: Evidence from the Surveys of Small Business Finances, Small Business Administration, Office of Advocacy. June 2010.
  • Chia-Li Chien, Chien Associates LLC. Business Value Drivers Study; July 2010.
  • Center for Women’s Business Research. 2007. Exiting your business: Serendipity or Strategy?

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