The Chinese Secret to Saving Money Revealed
The Chinese Secret to Saving Money Revealed
Transcript
00:00In this video, I'm gonna reveal the Chinese secret
00:02to saving money.
00:03Now, I've gotten a lot of these money-saving tips
00:05from my dad, who is your typical
00:07good-with-money Chinese person,
00:08and I wanna share with you those today.
00:10People sometimes will ask me if I'm half Asian,
00:12but I'm actually 100% Chinese,
00:14and my mom is from Beijing, my dad is from Shanghai,
00:17and I've done many trips to China,
00:18including two six-month stretches,
00:20both in Hong Kong and in Beijing,
00:22and many trips in between.
00:23So sit back.
00:24Ni hao, wo men xian zai kai shi zhe ge jian mu ba.
00:26The most stunning fact about the Chinese
00:28is that in China, the gross savings rate there
00:30is 45.9% as of December 2021.
00:33That means on every $100 that they bring in,
00:36they're going to be saving roughly $46 of that.
00:38Contrast that to the United States,
00:40where we have a heavy focus on consumption in this country.
00:43Our savings rate is typically between 3.5 and 5%,
00:46according to the data.
00:47So what's the reason for this big disparity?
00:50I mean, that's almost a factor of 10
00:52that we're talking about here.
00:53So why are the Chinese so good at saving money?
00:56First, it's definitely cultural.
00:57Us as Americans, we're always being hit with sales,
00:59discounts, financing options, and the like.
01:0280% off clothes.
01:03Come on in and I'll give you a free quote.
01:05And we're always kind of pressured
01:06to keep up with our neighbors.
01:08Is this car $15,000?
01:10Yeah, it is now.
01:12A lot of this originated after the post-World War II era.
01:15It was not long after the Great Depression,
01:17and it was deemed patriotic
01:18if you were actually to consume in America at that time.
01:21And so they were trying to spur the economy on.
01:23And I encourage you all to go shopping more.
01:25In China, it's very different.
01:27They have a heavy emphasis on saving money
01:29because of what money means to them,
01:31as well as the demographics of their country.
01:32You'll also find a heavy aversion
01:35to financing things in China.
01:36Oftentimes, Chinese people wanna buy things full in cash
01:39instead of trying to finance it and take on debt.
01:41Now, if you're just looking
01:42for the Chinese secret to saving money,
01:44I'm gonna leave a timestamp down below
01:45so that you can just skip to it if you want.
01:47However, right now I'm gonna cover the why
01:50as to why Chinese people save money,
01:51because I think it's really interesting.
01:53And if you understand intrinsically
01:56why Chinese people wanna save money,
01:57it can help you save money as well.
01:59So the first reason why Chinese people like to save money
02:01is the meaning of money and what it means to them.
02:04So as kids, you're taught from a very early age
02:07that saving money is honorable.
02:08Kids will often get money in these red envelopes
02:11for New Year's and birthdays,
02:12and they are often encouraged by their parents to save it.
02:15This money is referred to as lucky money.
02:17Now, money is so important to the Chinese
02:19that they even have a phrase during the holidays
02:21and New Year's that they say.
02:23Instead of happy New Year, they say something else.
02:25Let's listen to Ronny Chieng, the comedian,
02:27explain it better than I can.
02:28Even during Chinese New Year,
02:30the biggest holiday for Chinese people, Chinese New Year,
02:34when we see each other during Chinese New Year,
02:37the way we greet each other is we say,
02:39Gong Xi Fa Cai, or Gong Hei Fa Choy in Cantonese.
02:43I'm sure you've heard that, at least prayerfully, right?
02:45Gong Xi Fa Cai, Gong Xi Fa Cai.
02:47Gong Xi Fa Cai means hope you get rich.
02:50That's not happy New Year.
03:01That's pretty funny because it's also true.
03:03You can also see the importance of money
03:04in the way that people in Chinese society
03:07treat other people with a lot of money.
03:08People with a lot of money in Chinese culture
03:11are deemed successful in many people's eyes,
03:13and so it's often viewed as a good thing
03:15to have a lot of money.
03:16Now, being successful also has its other perks in China,
03:20and that actually brings me to my next point,
03:21which is demographics.
03:22Up until 2016, China actually had a one-child policy
03:26that was implemented in the late 70s and early 80s
03:29to kind of stem overpopulation,
03:31and that means each family could have one child.
03:33Now, if you had more than one child,
03:35you would just be slapped with a fine,
03:37and in addition, if you didn't pay that fine,
03:39your household would not be able to register
03:42your second child's name in the household system,
03:44so your second child would not be eligible
03:46for healthcare services and other services like education.
03:49So naturally, this one-child policy
03:50created a sharp decline in newborns,
03:53as you can see by this graph,
03:54but also in sex-selective abortions.
03:57In China, it's usually much more important
03:58to have a boy than a girl
04:00because the boy usually inherits the family name
04:03as well as the property,
04:04so what you had was a lot of people
04:05kind of using contraception
04:07in a way that they would avoid female births
04:10and try to optimize for male births,
04:11and with that contraception,
04:13actually, it skewed the population
04:14to having more males than females over time,
04:17so at its worst, it was 122 males
04:19for every 100 females that were born.
04:21Now, in general terms, if you have more men than women,
04:23then you have a supply-and-demand issue, right?
04:26So there's more men chasing the same amount of women,
04:29so basically, to stand out as a man in China,
04:31you have to be viewed as successful,
04:32aka you probably have a lot of money.
04:34The other thing with the one-child policy
04:36was that since families were only having one child,
04:38they weren't having multiple kids in the majority of cases,
04:41that means that the parents could save more money
04:43because they didn't have multiple kids to feed,
04:45so you kinda had a double whammy with the one-child policy.
04:48You had parents not having to spend as much money,
04:50and then the males trying to save as much money
04:52to become desirable.
04:53Another reason for saving in China
04:55is that there's no 401k, there's no IRA,
04:57there's no retirement accounts
04:58that Chinese people can contribute to.
05:00Rather, they do have what's called a pension system,
05:03but still, many people in China are wary
05:05that the pension system will still be around
05:07when they retire, and so they also worry
05:09about the cost of healthcare, education,
05:11and their own pensions.
05:12So these are some of the main intrinsic reasons
05:14as to why Chinese people like to save money,
05:16but let's actually talk about the money secret of this video.
05:19The main secret as to why Chinese people
05:21are brilliant at saving money, it's not anything crazy,
05:24it's just that they have every dollar accounted for.
05:26In my particular case, my dad would always know
05:29where his money was going at all times,
05:31and there is a special budgeting system
05:33that can help you with this,
05:34and in America and in the Western countries,
05:37it's called the zero-based budgeting system.
05:39The zero-based budgeting system is a method
05:41in which you budget where you spend every last cent
05:45of your monthly income so that your amount left
05:46at the end of every month is equal to zero.
05:49So that means your income minus your expenses
05:51equals zero at the end of the month.
05:53Now, expenses in this case also includes savings,
05:56investments, paying off debt, et cetera.
05:58Let's pretend you make $4,000 a month.
06:01A zero-based budget might look like the following.
06:03You have your rent, your groceries, your necessities,
06:05all listed right here, but then you also have a section
06:08for the things that you're saving for.
06:09Your emergency fund, your IRA, your student loan payments,
06:13new car fund, and then any other savings
06:16that you might wanna do.
06:17You can see by the time that you get
06:18to the end of your budgeting,
06:19you are left with $0 at the bottom right here.
06:23This is essentially the zero-based budgeting system
06:25where all dollars are accounted for.
06:27You can easily do this budgeting system at home,
06:29but it also means that you have to be super honest
06:32with your own expenses, and sometimes you might have
06:34to do this for three months to get an average
06:36of all your variable expenses throughout the three months.
06:39If you watched some of my videos before,
06:40you should know that this budgeting system
06:42doesn't exactly tell you how much you should spend
06:44for every single category.
06:46Rather, it kind of helps you understand your expenses
06:48as a whole, including your fixed expenses,
06:50and then you can kind of categorize your expenses
06:52and allocate your budget from there.
06:53All right, there are four main factors
06:55that the Chinese prioritize to help them save
06:57a lot of money that I wanna tell you about.
06:59Before we do that, though,
07:00make sure to drop this video a like,
07:02and if you enjoy economics and business content,
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07:07That comes out twice a week on Wednesdays and Sundays.
07:10It's completely free to sign up,
07:11and I will link it down below,
07:12and I hope to see you guys in the newsletter as well.
07:14All right, so the first of the four main factors
07:16that the Chinese do to help them save money
07:18is that they don't indulge in luxury goods
07:21or goods that are just there as status symbols.
07:24The majority of Chinese people wanna stay humble,
07:26and they also wanna fly under the radar,
07:28so they usually stay away from these luxury products.
07:30Number two, when the Chinese earn money,
07:33they usually like to live off a very small percentage
07:36of their income.
07:36Now, my dad grew up with very little money
07:38as a child in Shanghai.
07:40There were some days that he could not even afford food,
07:43and he would go to sleep hungry.
07:44When he was able to afford food,
07:45all he could really buy at the time
07:47was a plain pastry called a mantou,
07:49and a mantou is a tasteless kind of white bun
07:53that you can buy for very cheap.
07:54Because of this tough childhood,
07:56when my dad started his career,
07:57whenever he earned, let's say, $10,
07:59he tried to live off of one single dollar.
08:02Now, in reality, was he able to live off of $1
08:04for every $10 that he earned?
08:06Not really.
08:07There were gonna be times that he had to spend
08:09six, seven, eight, or nine out of those $10
08:12just to make ends meet.
08:13For him, though, saving money wasn't a way to build wealth.
08:16It was actually a way to ensure
08:18that he never had to sleep hungry again.
08:20So this simple principle of trying to save
08:22as much money as you can and live off of little as possible
08:25really stuck with me, and it's one of the main factors
08:27that I think many other Chinese people adopt as well.
08:29Now, this is a good rule if you're trying to build wealth,
08:32but please understand that this type of rule
08:34will create what's called a scarcity mindset about money,
08:37and so you kind of have to acknowledge that psychologically
08:40that as you earn more money,
08:41you can kind of switch your mindset
08:43into more of an abundance mindset later on.
08:45The third factor that the Chinese employ
08:47to save a lot of money
08:49is that they really focus on their needs versus their wants.
08:53So another wise lesson from them
08:54is that if you need something
08:56and you have to actually spend money on something you need,
08:59then go ahead and spend money,
09:00especially if it pertains to your health.
09:02So if you're debating between a flimsy desk chair
09:05or an ergonomic chair
09:06that might be able to make you more comfortable
09:08and stay healthier throughout the day,
09:10you might wanna opt for that ergonomic chair.
09:12I would classify the ergonomic chair
09:14as a need within reason.
09:16Of course, you don't wanna take this logic
09:18to the most extreme.
09:19For example, everyone needs clothes,
09:21but that doesn't mean you need to go buy Gucci clothes
09:24just because they are better because it's a need.
09:27So here, the idea is to be reasonable with your spending
09:30and make smart choices and save where you can.
09:32Now, when it comes to wants,
09:33you can still buy something that you want,
09:35but make sure that you're gonna get
09:36really good value out of that.
09:38So what do I mean by that?
09:39Let's say you buy a $350 fancy wallet.
09:43Like, let's say you just really wanted this.
09:45Well, you wanna make sure that you can use that wallet
09:47for a very long time
09:48so that it amortizes the cost of your use.
09:51Could you use that wallet for five years?
09:53Then that means you would take that $350
09:56and spread it out over five years of usage.
09:58That comes out to less than 20 cents a day.
10:00Spending money is inevitable.
10:02Everybody will have to spend money at some point,
10:04but the lesson here is to be reasonable and frugal
10:06with most of your decisions.
10:08The last factor here is that
10:09if you're trying to save money very quickly,
10:11the Chinese would advise you to stay at home
10:14and eat at home.
10:15No, we have food at home.
10:17Food at home.
10:20I think this one is pretty universal to most cultures.
10:22We know that by eating out,
10:24we're spending a lot more money on food than we need to.
10:26And in my household, I remember growing up
10:28and we would maybe go out to eat once every other week.
10:31Usually having people over to have a group dinner
10:34was more of a commonplace.
10:36And so that was our way of socializing
10:38as a family growing up.
10:39And the eating out was just mostly saved
10:41for special occasions.
10:42I hope some of these tips will inspire you to save.
10:45If they did, please let me know in the comments.
10:47And as the Chinese would say during New Year's,
10:49Gong Xi Fa Cai, which means I hope you get rich.
10:52Make sure to check out my newsletter, Hump Days,
10:53and I'll see you guys in the next video.
10:55Peace.