UpFront | Published in October 2016

Asian-Americans Need Financial Education

They place high importance on providing college tuition and taking care of family members

By Rebecca Moore | October 2016

Asian-Americans (including Pacific Islanders) share a focus on the financial progress, stability and security of the extended family. At the same time, Asian-Americans face many of the same financial challenges as the U.S. general population such as saving for retirement and managing household budgets, says the 2016 Asian-American Financial Experience survey from Prudential.
Asian-Americans surveyed place a higher importance on providing college tuition for their children and taking care of family members as one of their top financial goals compared with the U.S. general population. Roughly one-third of Asian-Americans identify themselves as caregivers for another person—e.g., spouse, parent, relative—compared with 22% of the general population. In addition, 20% of Asian-Americans provide financial assistance to their relatives vs. only 6% of the general population.
Sri Reddy, head of full service investments at Prudential Retirement in Hartford, Connecticut, says that while retirement is important, the focus on family is equally important to Asian-Americans, so plan sponsors and advisers can provide tools and solutions for total financial wellness, such as college planning, caretaker planning and long-term care. “The study shows clearly that [these people don’t] want to be a burden on their own children, so they are also open to saving more on their own,” he says.
According to the study, Asian-Americans feel better off financially than the general population and better prepared for retirement. They believe they will be able to retire at age 64.6—more than a year earlier than the U.S. general population.
Reddy says three factors contribute to the greater financial optimism Asian-Americans’ have. Most Asian-Americans live on the East or West Coast where incomes tend to be higher than the national average, so their savings are also higher. Most are the first generation of immigrants, and they typically obtain visas for jobs requiring higher education. This means they tend to work for larger employers that are more likely to offer a defined contribution (DC) retirement plan. In addition, when an immigrant comes to a new country, he typically lacks a safety net to guard against any emergencies, so he will start saving right away. According to Reddy, most survey respondents have a year’s worth of rainy-day funds.
Like the general population, Asian-Americans rank retirement-related goals such as having enough money to maintain current lifestyles through retirement (49%) and not becoming a financial burden to loved ones (38%) among their top financial priorities. Reddy says plan sponsors and advisers can help with these goals by providing broad-based education and guidance. “It’s not just about a single point in life—for example, they need to make the right decisions about debt,” he explains. “Debt is not always a bad thing. If someone can get a mortgage at a low interest rate, he can save more for retirement. But if the person is not aware of the choices, he could make an inappropriate choice.”

PS1016 UF Charts