in this video I'm going to reveal the Chinese secret to saving money now I've gotten a lot of these money saving tips from my dad who's your typical good with money Chinese person and I want to share with you those today people sometimes will ask me if I'm half asian but I'm actually 100 Chinese and my mom is from Beijing my dad is from Shanghai and I've done many trips to China including two six-month stretches both in Hong Kong and in Beijing and many trips in between so sit back nihaw women's the most stunning fact
about the Chinese is that in China the gross savings rate there is 45.9 percent as of December 2021 that means on every hundred dollars that they bring in they're going to be saving roughly 46 dollars of that contrast that to the United States where we have a heavy focus on consumption in this country our savings rate is typically between 3.5 and 5 according to the data so what's the reason for this big disparity I mean that's almost a factor of 10 that we're talking about here so why are the Chinese so good at saving money
first it's definitely cultural us As Americans we're always being hit with sales disc accounts financing options and the like 80 off clothes come on in and I'll give you a free quote and we're always kind of pressured to keep up with our neighbors is this car fifteen thousand dollars yeah it is now a lot of this originated After the post-world War II era it was not long after the Great Depression and it was deemed patriotic if you were actually to consume in America at that time and so they were trying to spur the economy on
and I encourage you all to go shopping more in China it's very different they have a heavy emphasis on saving money because of what money means to them as well as the demographics of their country you'll also find a heavy aversion to financing things in China oftentimes Chinese people want to buy things full in cash instead of trying to finance it and take on debt now if you're just looking for the Chinese secret to saving money I'm Gonna Leave a timestamp down below so that you can just skip to it if you want however right
now I'm going to cover the why as to why Chinese people save money because I think it's really interesting and if you if you understand intrinsically why Chinese people want to save money it can help you save money as well so the first reason reason why Chinese people like to save money is the meaning of money and what it means to them so as kids you're taught from a very early age that saving money is Honorable kids will often get money in these red envelopes for New Year's and birthdays and they are often encouraged by
their parents to save it this money is referred to as lucky money now money is so important to the Chinese that they even have a phrase during the holidays and new years that they say instead of happy New Year they say something else let's listen to Ronnie Chang the comedian explain it better than I can even during Chinese New Year the biggest holiday for Chinese people Chinese New Year when we see each other during Chinese New Year the way we greet each other is we say in Cantonese I'm sure you've heard that at least perfectly
right means hope you get rich [Applause] that's not happy that's pretty funny because it's also true you can also see the importance of money in the way that people in Chinese Society treat other people with a lot of money people with a lot of money in Chinese culture are deemed successful in many people's eyes and so it's often viewed as a good thing to have a lot of money now being successful also has its other perks in China and that actually brings me to my next point which is demographics up until 2016 China actually had
a one child policy that was implemented in the late 70s and early 80s to kind of stem overpopulation and that means each family could have one child so now if you had more than one child you would just be slapped with a fine and in addition if you didn't pay that fine your household would not be able to register your second child's name in the household system so your second child would not be eligible for health care services and other services like education so naturally this one child policy created a sharp decline in newborns as
you can see by this graph but also in sex selective abortions in China it's usually much more important to have a boy than a girl because the boy usually inherits the family name as well as the property so what you had was a lot of people kind of using contraception in a way that they would avoid female bursts and try to optimize for mail bursts and with that contraception actually it skewed the population having more males than females over time so at its worst it was 122 males for every 100 females that were born now
in general terms if you have more men than women than you have a supply and demand issue right so there's more men chasing the same amount of women so basically to stand out as a man in China you have to be viewed as successful AKA you probably have a lot of money the other thing with the one child policy was that since families were only having one child they weren't having multiple kids in the majority of cases that means that the parents could save more money because they didn't have multiple kids to feed so you
kind of had a double whammy with the one child policy you had parents not having to spend as much money and then the males trying to save as much money to become desirable another reason for saving in China is that there's no 401K there's no Ira there's no retirement accounts that Chinese people can contribute to rather they do have what's called a pension system but still many people in China are wary that the pension system will still be around when they retire and so they also worry about the cost of healthcare education and their own
pensions so these are some of the main intrinsic reasons as to why Chinese people like to save money but let's actually talk about the money secret of this video the main secret as to why Chinese people are brilliant at saving money it's not anything crazy it's just that they have every dollar accounted for in my particular case my dad would always know where his money was going at all times and there is a special budgeting system that can help you with this and in America and in the Western countries it's called the zero-based budgeting system
the zero-based budgeting system is a method in which you budget where you spend every last cent of your monthly income so that your amount left at the end of every month is equal to zero so that means your income minus your expenses equals zero at the end of the month now expenses in this case also includes savings Investments paying off debt Etc let's pretend you make four thousand dollars a month a zero-based budget might look like the following you have your rents your groceries your Necessities all listed right here but then you also have a
section for the things that you're saving for your emergency fund your IRA your student loan payments new car fund and then any other savings that you might want to do you can see by the time that you get to the end of your budgeting you are left with zero dollars at the bottom right here this is essentially the zero based budgeting system where all dollars are accounted for you can easily do this budgeting system at home but it also means that you have to be super honest with your own expenses and sometimes you might have
to do this for three months to get an average of all your variable expenses throughout the three months if you've watched some of my videos before you should know that this budgeting system doesn't exactly tell you how much you should spend for every single category rather it kind of helps you understand your expenses as a whole including your fixed expenses and then you can kind of categorize your expenses and allocate your budget from there all right there are four main factors that the Chinese prioritize to help them save a lot of money that I want
to tell you about before we do that though make sure to drop this video a like and if you enjoy economics and business content I want you to check out my free newsletter called hump days that comes out twice a week on Wednesdays and Sundays it's completely free to sign up and I will link it down below and I hope to see you guys in the newsletter as well all right so the first of the four main factors that the Chinese do to help them save money is that they don't indulge in luxury goods or
Goods that are just there as status symbols the majority of Chinese people want to stay humble and they also want to fly under the radar so they usually stay away from these luxury products number two when the Chinese earn money they usually like to live off a very small percentage of their income now my dad grew up with very little money as a child in Shanghai there were some days that he could not even afford food and he would go to sleep hungry when he was able to afford food all he could really buy at
the time was a plain pastry called the manto and amanto is a tasteless kind of white bun that you can buy for very cheap because of this tough childhood when my dad started his career whenever he earned let's say ten dollars he tried to live off of one single dollar now in reality was he able to live off of one dollar for every ten dollars that he earned not really there were going to be times that he had to spend six seven eight or nine out of those ten dollars just to make ends meet for
him though saving money wasn't a way to build wealth it was actually a way to ensure that he never had to sleep hungry again so this simple principle of trying to save as much money as you can and live off of little as possible really stuck with me and it's one of the main factors that I think many other Chinese people adopt as well now this is a good rule if you're trying to build wealth But please understand that this type of rule will create what's called a scarcity mindset about money and so you kind
of have to acknowledge that psychologically that as you earn more money you can kind of switch your mindset into more of an abundance mindset later on the third factor that the Chinese employ to save a lot of money is that they really focus on their needs versus their wants so another Wise lesson from them is that if you need something and you have to actually spend money on something you need then go ahead and spend money especially if it pertains to your health so if you're debating between a flimsy desk chair or an ergonomic chair
that might be able to make you more comfortable and stay healthier throughout the day you might want to opt for that ergonomic chair I would classify the ergonomic chair as a need within reason of course you don't want to take this logic to the most extreme for example everyone needs clothes but that doesn't mean you need to go buy Gucci clothes just because they are better because it's a need so here the idea is to be reasonable with your spending and make smart choices and save where you can now when it comes to wants you
can still buy something that you want but make sure that you're going to get really good value out of that so what do I mean by that let's say you buy a 350 dollar fancy wallet like let's say you just really wanted this well you want to make sure that you can use that wallet for a very long time so that it amortizes the cost of your use could you use that wallet for five years then that means you would take that 350 dollars and spread it out over five years of usage that comes out
to less than 20 cents a day spending money is inevitable everybody will have to spend money at some point but the lesson here is to be reasonable and Frugal with most of your decisions the last Factor here is that if you're trying to save money very quickly the Chinese would advise you to stay at home and eat at home now we have food at home food at home I think this one is pretty Universal to most cultures we know that by eating out we're spending a lot more money on food than we need to and
in my household I remember growing up and we would maybe go out to eat once every other week usually having people over to have a group dinner was more of a common place and so that was our way of socializing as a family growing up and the eating out was just mostly saved for special occasions I hope some of these tips will inspire you to save if they did please let me know in the comments and as the Chinese would say during New Year's gong XI fatsai which means I hope you get rich make sure
to check out my newsletter hump days and I'll see you guys in the next video peace
