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Why do immigrants save so much more money than you?

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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.

Passport immigration stamp

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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107 Comments

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  1. When I was in 6th grade, I found out that my friend from Pakistan had been paying the family bills and balancing the family checkbook for more than a year. His father said it was important that they learn to handle personal finances and how better than to learn by doing. I thought he was a bit crazy, but my friend handles his money much better than most of the people I know.

  2. 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. 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! :P

  4. One factor you missed out is a lot of immigrants are used to a much lower standard of living in their home countries. While their income jumps quite a bit after they get to America, their standard of living adjusts much slower.

  5. My girlfriend was born in Hong Kong, and she wastes NOTHING. This includes washing plastic sandwich bags. Clothes are repaired before they are replaced. Food does not get thrown out (even chicken feet can be eaten)

    Waste not, want not….

  6. I think the most insidious reason for the savings divide is that American culture has steadily encouraged consumption vs. saving more and more each year. If you know what to look for, you can see this in the quality of the persuasive arguments embedded into the advertisements of today versus twenty years ago. I’m sure it’s more observable the further back one goes.

    Maybe I’m wrong, but when the President of the United States is tapped to become a spokesperson to save the travel and leisure industry (think post 9/11), I think the cultural divide between a savings based culture and a consumer driven culture grew by leaps and bounds.

    I would say the biggest difference between cultures (particularly Indian Americans) I’ve noticed is the ability to resist the immediate upgrade. Instead of rushing out to buy something new, they wait to buy it secondhand or do enough research to know when to leapfrog technologies.

  7. My grandmother saves babywipes.

    No, not used ones of course. But you know, when you’re changing a kid and you accidentally pull out more wipes than you use? And then, without much thought, ball it all together and throw it out?

    Somehow, someway, my grandmother (who just got to America 5 years ago), managed to save those extra wipes. And one day when I was tearing up the house finding some wipes to change my nephew, she pulled out a disposable glove, gave me her stock of wipes and saved the day.

    I love this.

  8. You might also mention that immigrants tend to put multiple generations of a family in the same house. 3 generations might live together which not only saves money on housing but also provides free child care (which is often super expensive).

  9. “we never had a summer home. . .” Sorry, this made me chuckle a little, as if most Americans DO have summer homes? That seems like a huge luxury that isn’t part of the discussion.

    Anyway. Back to your real point. I think that more people live in a smaller space when it comes to both roommates and family situations in roommates in immigrant communities. Sort of as others mentioned, the standard of living at home is much lower, so it feels (and is!) extremely wasteful to live in the large living spaces some native born Americans find normal. Housing is most peoples largest bill.

  10. Ramit,

    This particular phenomenon is discussed in the book “The Millionaire Next Door” which I see you have on your reading list. I am assuming that is where you came up with some of your initial reasons as to why this particular savings pattern occurs. Like you, I am very interested to see what other factors may contribute to savings habits of immigrants.

    One very interesting point that was made in the book, is that first generation immigrants often tend to be great savers, but the children of those immigrants tend to break away from the ridiculously hard working/living beneath your means type of behaviors. More often then not, that second generation tends to underachieve in regards to their saving behaviors (as compared to the 1st generation immigrant parents).

  11. Very true about saving/spending habits. In the ’80′s, my parents being refugees who immigrated here with absolutely no skills (no understanding of English either), they managed to save like $50,000 from welfare payments, recycling cans, and odd jobs that they were hired for in 10 years. Not the six-figures ‘Raj’ saved but still.

  12. It seems we had a similar upbringing.

    I was born in Ukraine (during the Soviet Union) and moved to North America when I was 6. Even though my family had little money, my brother and eye were always involved in some sort of activity, be it sports teams or camps. We hardly went out to eat, and always packed lunches (still do).

    Just from my circle of friends I think immigrants (and others who grew up with little money) are much more financially conscious. This is reflected in day-to-day spending habits, long term financial planning, and just their general attitude towards money,

    Cheers.

  13. This is a good topic. I think part of it depends on the home country culture. I recently wrote a grad school paper on unbanked Mexican and Central American immigrants; members of these groups bring memories of bank runs and currency crises to the US and as a result avoid the formal banking sector.

    My first job after college was second shift in a testing lab for a drug company. The Indian immigrants worked there for the steady paycheck and health benefits, and ran small businesses during the day. They drove 10 yr old American cars. They didn’t need to go to banks for mortgages – they went to family networks and got the money that way. Only string attached was that when cousin Raj moved to the USA they were expected to chip in for cousin Raj’s house. Since I was different than the other Americans working there in my financial attitudes, they trusted me with this information – they didn’t want the US-born bosses with mortgages, credit card debt, alimony, and car payments to freak out upon learning that the line supervisor making $50k had no mortgage and a business after being in the country for 10 years.

    Anecdotally I’ve seen the children of immigrants get into deep debt in order to project the image of American success, especially in cultures where the American relatives are expected to triumphantly return to the home country with gifts for everyone.

  14. I think that a huge part of this difference in attitudes may be due to what group we choose to compare ourselves to. People, once their basic needs are fulfilled, are happy or unhappy not because they have or have not, but because they have more or have less than others.
    For us immigrants the point of reference are people who stayed in the home country, or other immigrants who arrived recently (success is often judged by the answer to “how long have you been here?”), rather than locals. There are enough people who see me as rich in the group I feel I belong to that I do not feel the need to spend more on status and so I spend only on my true needs. Most of the “frugal” stuff I do is not a sacrifice, I just prefer it this way. I cook at home because my food is way better than what most restaurants offer and it makes me proud and happy to cook a good meal, even though we could afford eating out.
    We (my husband and I) live on 60% of our income (about twice the local average household income), have no debts except for mortgage on a house that’s very small by local standards but fine for us, we have one old car. And, hey, we feel rich.

  15. I think it has more to do with the fact that the American Dream is still “work hard, save money, buy a house to stake claim of prosperity”. Most Americans that end up in debt forget about the work-hard-save-money bit and just shoot for the trappings of prosperity rather than the real thing (far less glamorous). Most of those who are debt-free probably have substantial savings. I’d also have to venture that most of your friends are probably young-ish, so they simply haven’t had the time to make the kind of money that would allow them to save up that kind of money, even if they are frugal tightwads.

  16. I agree with the article 100 percent. I know a few Indian immigrants and they are great savers, hard workers, and very smart.
    Of course they are not raised with the mind set of get what you want no matter what the cost. Even if it will create debt Americans will get it. I know i went into debt over stupid things i could have waited for or not bought at all.

  17. It is heavily influenced by family and culture. It’s not just a matter of being an immigrant vs being a (US) native. Try seeing how a Persian immigrant saves/spends compared to an Indian immigrant!

  18. This is really true. I have been in US for good amount of time and we used to see dollars as rupees. That would mean 1 dollar is 50 rupees. If a pack of bread is $3 (Rs.150), it costs Rs.15 to buy one in India. So do I spend 10 times more buy the bread. Certain basic things like food, clothing etc you can’t avoid. But for others this calculation prevails and I would not buy them even if I have a big bank balance.

    That is just on the currency difference. But there are far more cultural difference which actually brings in the basic attitude towards frugality.

  19. Ramit, I’m from Guatemala and the same goes here: most Guatemalans in the US send money back home and are used to living well below their means and saving a chunk of their income.

    But one of the biggest differences I’ve noticed lies in real estate. Here it’s simply a house to most Americans. You buy one, you sell it, you buy another one.

    In Guatemala the land you buy is almost sacred. It’s yours and you don’t just flip it and sell it. Owning a piece of land is a big deal (our country’s history has something to do with that), but it always strikes me as a little odd when people here are so quick to sell a house/land without ever feeling strange about it.

  20. I’m very close to the Mexican American culture.

    One thing I’ve noticed about this culture is these people do save a lot, much more so than their Anglicized counterparts. However, I question if it’s not all for nothing as they have a cultural distrust of banks, brokerages, etc.

    Have you heard of the story from the personal finance book where the guy has $65000 in cash buried in a suitcase in his back yard? That’s basically what you get.

  21. Very illuminating post. See the opening of “A Wife’s Story” by an Indian-North American writer. The “Patels” don’t get sucked into buying land from real estate scammers and end up owning Hoboken! The narrator of the story is watching a David Mamet play in which the characters are maligning “Patels,” because they can’t con them.

  22. I think that many immigrants have seen actual poverty while most people born in the US have not. I have seen what I thought was poverty here in the US, but that poverty includes things like cars, televisions, and refrigerators. I remember growing up and thinking that my family was poor, but we had all of these things and more. My parents were deeply in debt and we still had these things.

    The lessons that I learned from my family regarding money were not the value of saving the results of your hard work. I had to come to these realizations on my own. I’m marrying a man who got quite a different education in money from his parents (his dad worked as a financial planner for a stretch). He saves obsessively, and would much rather save money than use it to buy an expensive flashy gadget, bag, or car. Thanks to my earlier realizations and his discipline, I am confident that I’ll be able to overcome my lack of early financial education.

    My guess is that immigrants to this country are taught what poverty really means, and that saving is the key to avoiding those consequences. Most Americans who have never wanted for anything, even when “poor”, don’t get those same lessons to their detriment.

  23. I think this is fascinating because it’s totally true. And we can speculate about a million different reasons why, but there aren’t any hard and fast rules.

    The biggest difference I can see between me and my parents (immigrants) is lifestyle choices. I’m more likely to go out to eat with friends a few times a week — something my parents don’t spend money on. I’ll buy lattes — my parents abhor Starbucks and think it’s the epitome of yuppiness. These kinds of little lifestyle choices, I think, are the biggest difference between those raised in America and those who immigrate here. For Americans, these kinds of things — eating out, lattes, manicures, whatever — are pretty commonplace. In a lot of the countries where immigrants come from, people aren’t taking part in these activities on a regular basis so when they come here it doesn’t even occur to them to make those lifestyle choices — and that’s what allows them to save so much more money.

  24. In addition to being risk averse and encouraging a higher savings rate, I’ve noticed the immigrants I know have specific goals they are saving for, whereas most of my peers look off into all to distant, unspecific dreams of the future. For example, I wait tables part time and some of the cooks are saving plenty to start restaurants back in Mexico, and they already own plenty of land.

  25. I had a Ghanian friend in Japan, that used to live on about $100 per month here.

    As a school teacher in Ghana he only earned about $300, but as a waiter in Japan he could make close to $2000 per month.

    He lived in a company apartment, never ate out and always took scrap bones from the restaurant to make soups. He managed to save about $1900 per month on a $2000 income. After three years of living in Japan, he was able to send enough money back home to build a house and start several small businesses employing friends and relatives.

    It was all about sacrifice for a better future. He sacrificed for three short years and now he will reap the benefits for the rest of his life. He was an immigrant waiter in Japan, but he is wealthy businessman now.

  26. As the daughter of German immigrants – these are some things my parents would do:

    - Have a garden to reduce grocery bills.
    - Only buy (what they called) “luxury” foods for the holidays (cookies, cakes, etc) – I don’t do this having always felt it was Draconian.
    - Rarely ever eat out.
    - Rarely ever buy trendy toys, or trendy anything for that matter.
    - Make us kids wear hand-me-downs even when we had the money to buy expensive clothes.
    - Make us kids get a job as soon as we were able (babysitting, shoveling snow for neighbors) and start a savings account.
    - Shop garage sales for used goods. They still do this, even though they are now multi-millionaires.
    - Almost never buy anything unless it’s on sale.
    - Save everything and use it some new and different fashion – a shoebox or pasta jar doubles as a storage container, plastic shopping bags become garbage bags, newspapers become wrapping paper.

    I understand that some immigrant groups save much more than “native” Americans, but I think it’s a much tougher, less enjoyable way to live life. My parents live in a large home, with nice cars, and plenty of money in the bank, but little of anything else. Sometimes I feel it’s a strange pathology that they will never overcome. Their concern for money impedes their ability to have fun.

  27. A major difference I see between my parents (immigrants from Ukraine) and me (raised here) is how they socialize. I’m much more likely to go out for drinks, dinner, coffee, etc when I want to meet up with friends or out for a special night with my husband. My parents have lots of friends and always seem to be having a good time, but they always do it at each others’ houses, instead of out at expensive restaurants and bars. I don’t think this feels like much of a sacrifice, cause my parents are great cooks and hosts and so are many of their friends! Even fancy food at home (and they do have feasts!) is still cheaper than going out to an average restaurant. That attitude — we can do it ourselves, we don’t need anyone or anything else to provide the (food, entertainment, whatever) always seems like a big contrast between typical American and immigrant attitudes.

  28. It is sad that this only last for 1st generation and gets lost later on.

    You mentioned retirment which is very true. My parents don’t have any retirment saving, but they were unskilled workers who had hard time making ends meeet until me and my brother started working. But we dont move out of home at 18 or after collage graduation. it is traditional for kids to stay with parents until they have family of their own (get married). This helps both out financially.

    Also when parents get old, it is traditional and expected, for the kids to take care of them. There is less I and more We which helps.

  29. I grew up in Fremont actually =) and my parents are from China, and my dad especially grew up very poor. I’ve thought about this a lot and have never been able to figure out the exact reasoning behind their spending habits, but maybe somebody else will.

    They’ve done pretty well for themselves, but they’re incredibly thrifty in some areas and don’t mind spending a lot in others. My dad loves to wear T-shirts he got for free or under $10. They think $4 for coffee is outrageous. They don’t really accumulate “stuff” like books/movies or housewares. Yet they’ll drop tens of thousands to redo some part of the house in marble, or buy a new Lexus. They also enjoy eating out frequently and treating people- even at a family reunion with a $1000 bill. But overall, they seem very responsible financially and have savings, retirement, investments, good credit, etc.

    It’s as if they’ve decided on the few things that they need to feel rich, and will pinch pennies on everything else. Which I guess is sort of what Ramit has suggested in other posts. But it’s still weird to me when my dad walks out of his Lexus in an outfit he got from Ross like 10 years ago.

  30. i think there are many reasons why asian immigrants have different saving patterns than americans. my parents are chinese immigrants and have saved a lot of money. a big reason i think, and mentioned previously by someone else, is that they have experienced poverty. their fear of returning back to such an economic state is a reason for their compulsive saving. another big reason is for me, their children. it takes a certain type of person to move to an entirely different country with little knowledge of the language and culture. they want to make a better life for themselves and their children. a third reason, is the culture in america. when i was younger, i didn’t understand why they wouldn’t indulge in certain things, like going out to eat more often. but to my parents, the price of doing such things did not measure up to the level of happiness they received in return. advertising in america is all about trying to convince you that you need things you don’t. immigrants just don’t have this sort of desire to impulsively buy short term happiness like us americans.

  31. First, congrats to all the posters on their stories of success! It’s great to see that each day, more and more people are realizing the “financial security” dream.

    Although, I think we’re skimming the surface on WHY immigrants are such good savers. Derek (#10) starts to get at the root and I’d like to add some more. I’m building my own personal finance blog and this was a topic I had planned to address.

    Everyone seems to be commenting on the cultural differences, but I believe there is a phenomenon that transcends: race, age, gender, and even financial acumen. Referring to this as the “Gratification Shift”, I believe there’s a strong, mathematical correlation between significant life events we experience and our resulting financial decisions. Obviously not a new concept, I think the novelty is in the ability to prove it numerically. I am going to try and give the summary of the theory here, but I’ll repost to this article once the website is live (hopefully by end of the month).

    Simple harmonic motion describes a repetitive oscillation (back and forth) around an equilibrium, much like our lives. Up, down, good, bad – our lives generally rotate about some center unless a significant event is introduced. Let’s call this the “Life Events” curve with good events being positive and bad events being negative.

    Here’s where it gets more interesting, but also more complex. The decision to deny/allow ourselves certain luxuries are generally based on past experiences. As noted in many people’s examples, current financial situations typically don’t play a major role. Let’s refer to this as the “Gratification” curve with allowing luxuries being positive and denying luxuries being negative.

    Whenever something bad happens to us, it takes a while to recover and “get back to normal”. This is the first part of the relationship between the curves – the more negative the amplitude (height) of the event on our “Life Events” curve, the longer the period (width) on our “Gratification” curve. Ex: Great Depression. The severity of the drop prevented many people from allowing themselves luxuries for a very long time. But, depending on how severe the event was, we may never return to 100%. This is referred to as “dampening” and is the second part of the relationship. Simply because the significant event is over and life has moved on, the scars from that experience may never allow us to fully reclaim our gratification abilities. Ex: Immigration. As people have noted, the appreciation of what this country offers compared to their home country may paralyze that person from ever being able to spend “willy-nilly”.

    Hopefully everything has been pretty clear. Any terms that seem technical should have entries in Wikipedia you can reference. Feel free to leave comments, although I’m still in the early stages with this idea.

  32. As an American, I have learned several ways to save and become more discipline with my money from my immigrants friends than personal finance books. Proud to say now I too have a very healthy 6 figure net worth hopefully I can past that within 6 years

  33. A portion of our low savings rates has to be related to social programs like social security, workers comp, disability, and unemployment.

    We technically contribute 15% of our income just to social security and medicare. Since many other countries don’t have these programs, they are already accustomed to saving for retirement, unemployment, etc… on their own.

  34. Huge difference between American-born and immigrants: allowances.

    Being a Russian immigrant, I was just expected to help out around the house and not talk back. If anything, my “allowance” was to have parents who provided food, shelter, and clothes.

    I was shocked–shocked–to see my American friends get $10, $20, sometimes $30 a WEEK just for existing. “Hey, you made it through another week without dying, here’s a few tenners.” Now, to be clear, I’m not criticizing, since each culture has their own practices and I’m completely cool with that. I was just surprised more than anything.

    And when there were chores to do, the parents would pay my friend money to mow the lawn or something. I would even see bartering going on. “Go mow the lawn.” “For how much?” “$10.” “How about $15?” “(younger brother) I’ll do it for $10.” “(back to my friend) That’s fine, he can do it.”

    I asked my friends if they saved for something big down the road. But most used it as spending money that week – for Magic cards, comics, anime. Granted, we were 9, 10, 12, etc. years old. But maybe that’s another difference: even at that age my Russian-immigrant self was thinking about saving for the big wins :)

    Allowances are a huge difference between American-born families and immigrants.

    Immigrant Power League, unite! *superhero flash of lightning*

    Oleg

  35. Hi,

    Can’t agree more with Ramit here. My wife and I are immigrants living in NYC, and I can vouch for this through our own story.

    Like Ramit said, we are well educated – we are both MBAs. Like Ramit said, we have well paying jobs in the city.

    In the 3 years that we have been here, we have saved upwards of $175,000 in cash. Yes, in 3 years. Of course, a double-income-no-kid (DINK) setup helped.

    So, were we misers? No. were we frugal? Yes. Did we have big-ticket spends? Yes. So how did we save? Here are a few points:

    - Unlike what Ramit said, we don’t live in a small apartment – we pay a rent of $2050 a month! “Perks” of living in NYC :-(

    - We love to travel, and have criss-crossed the entire country in these 3 years. All major cities of USA: Check. Alaska: Check. Puerto Rico: Check! In fact, we have also been to 5-6 countries in South America, and have rounded Cape Hope!

    - Yes, we love to travel! And we don’t mind spending on it. But it is not mindless – each trip is meticulously planned, and we book tickets on the most value-for-money flights / cruises. We don’t mind red-eye flights – saves us money, and gives us more time at the destination.

    - We stay in hotels / motels slightly away from city centers. This means 15 minutes of extra driving, but a lot of cost saving.

    - We drive a car that is a lot more modest compared to the cars driven by most people in our income class. People drive BMWs, we drive a Toyota. Bought 3 years used.

    - We don’t buy from department stores, we buy from discount chains.

    - Same for groceries and other regular stuff – we don’t buy fron Duane Reade, but from Target and BJs.

    - We don’t go to pubs very often. We have a good home theater system and a projector, and entertain people over movie nights. Movies rented through Netflix.

    - We do spend on gadgets, etc like everyone else. But all such purchases are very well researched. We look for deals and discounts, and don’t mind getting the iPhone on the 15th day of its release instead of its release day!

    - We have almost never bought any clothes at their suggested price. We always buy when there are discounts going on. Gap, Banana Republic, etc have discounts quite frequently. But even stores like Macy’s have deep discounts of 25% – twice a year. You just need to know when!

    - We buy a lot from factory outlet stores. Even brands like Coach have some great discounts – something unheard of in their regular retail stores.

    Our principle is: Spend a ton on what we love, cut costs in everything else. Every drop counts. Small savings add up. (I think this is exactly what Ramit also advises)

    A few side notes:

    - We didn’t save so much just because we earn so much. Many of our colleagues who earn more than us are in debt – they have a negative net worth! How much you save depends a LOT on how you spend.

    - Not a single cent is invested here. All the money is invested back in India (where we are from), in the stocks of the leading companies there, which offers us excellent returns (>15% CAGR – even after the credit crisis crash).

    - We fall under case 2 in Ramit’s post – we are moving back to India for good. This kind of money can provide a fabulous lifestyle in India – something that can’t even be imagined here unless you are a millionaire… (chauffer, butler, gardener – the works!)

    Hope our tips help other readers…

  36. Thank you for sharing, I have observed this in my community and in my life (am the daughter of Chinese immigrants) and I’m ashamed to say that I am caught up with the aggrandizing behaviour of my American counterparts. My parents had middle school education and their combined income in their first 5 years in the US (when I was in elementary school) is less than my current post-graduate training salary (about 50K pre-tax). They were saving 50% of their income and managed to start their own business within 10 years! They continue to chastise me for my non-frugal shopping behavior but I still have some residual immigrant behaviour (ie saving used bags for trash bags, recycling gift wrap, only shopping at sales and combining coupons and sale codes for discounts). I can only wish to be more like my parents! It doesn’t help that I live in a HCOLA but I’m still trying to save 30% of my post-tax income and I’m paying off my student loans diligently. How we can revert back to our parents’ ways is still a mystery! Any ideas?

  37. Ian made an incredibly important point, most other cultures pack in the generations into one home. Most of this stems from agrarian household models where the “family farm” was where everyone lived. Taking care of the elderly and the young is just different than American (or post industrial revolution societies)
    I think another big point is that in America there is no idea of Familial wealth, people here lost the concept. In Italy or France a vineyard makes sense as a business venture because it’s meant to support a family for three to four generations (100-120 years minimum). I doubt anyone here starts a company with that kind of outlook. Nor would we consider leaving all the money to our firstborn or even most responsible child with the idea that they would be a caretaker of that wealth while helping their family as it grew.
    So why do immigrants save so much, culturally they are closer to both of these concepts in general. Both of these concepts do not in any way promote consumption.
    On the plus side why do these immigrants come to America, because it is admittedly the best place in the world to come and work if you want to make money. Earning power in the US is still second to none compared to the rest of the world thankfully. This is a nation of immigrants, people ought to not forget that and respect the fact that in our capitalist society anyone who wants to come here and earn a buck can spend it however they want.

  38. As a first gen indian, I have observed this kind of saving first hand.

    When we got our first computer in 1993, my dad taught me everything about Quicken. He entered every single transaction into Quicken that we had. We had budgets. Saving money was a priority.

    Almost 20 years later, he still uses the exact same Quicken file. It probably is one of the largest files ever.

    From a broader view, it’s interesting that sacrificing lifestyle for savings doesn’t impact our happiness and self-esteem as much as it does for the instant gratification crowd.

    If we are confident that our efforts will reap rewards in the future, the sacrifices we make can actually be enjoyable.

  39. I am 32, but I am the youngest (by far) of four children. While most of my friends’ parents are baby boomers, my parents were both born in the 1930′s and raised in the 40′s.

    The impact of being raised in the post-Depression era by my grandparents, who were in their teens and early twenties during the Depression, is still apparent in both of my parents, particularly my mother.

    My parents habits, and the habits they passed on to me, are more in line with the “immigrant” habits outlined here than with the habits of my peers’ parents.

    I think the key is having known scarcity and want and through that having an appreciation not only for the things that you have but also for the fact that things CAN be bad and it can turn on a dime. My grandparents lived through it (NYC in the 1930s). They raised my parents that way, and my parents raised me that way. Many people today don’t understand these lessons.

  40. i think it all boils down to community/family-based societies of the old world vs. the individualistic society of the new world. back in Russia and India, your retirement depends wholly on how well your kids/family will take care of you.

    Since majority of immigrants (namely, my parents) have low earning potential when they come over, their retirement depends on their kids.

  41. Amy,

    As far as trying to revert back to our parents’ ways… I think the main thing is trying to recapture their values, not necessarily all of their super cheap behavior. I married a fellow immigrant, learned to cook and do lots of other stuff myself, and try to avoid watching too much TV. I’m with the other commenter who pointed out that the typical immigrant focus on always doing things the cheapest way possible can take away from enjoying life, so we need to find a balance.

  42. For Chinese, “Wasting” is almost like a sin, and “Saving and Being frugal” is what can make parents worry free.

  43. I would like to add – The same Indian who, when in US, saves like crazy might spend a lot in India just for show-off. E.g. Punjabi Indians are known for ostentatious spending. 2 reasons:

    1. Whom would he show off to, when in US? Here, he does not have the extended family and acquaintances that he has in India. This is why second generation immigrants are much more “American” in their spending patterns: they at least have the targets to show-off to from an early age.

    2. “A lot” in Indian currency is somewhat high spend in American currency, but not really “a lot”.

  44. My friend’s father came here from the Azores (small island chain in the Atlantic) with an 8th grade education in the 60′s. He worked all his life as a janitor in a high school. He retired early on his pension from his state job and the income from the 7 homes and 1 commercial property he owns (FYI – in the Silicon Valley, that translates to about 6 million in real estate). How did he do it?

    1. Save up for short term goals – He saved specifically to buy homes.
    2. Very risk averse – Invested only in real estate around his own home and always put 100% down. He never used leverage.
    3. Very tight knit family and friends – He and several neighboring families would group expenses like buying a whole cow and storing the meat in one of the homes or helping each other with day care and house work.

    Essentially, everything that article mentioned, he did.

    He lives well and has always enjoyed his life but has never spent frivolously.

  45. [...] here to read the rest: Why do immigrants save so much more money than you? | I Will Teach … You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, [...]

  46. This does not ring true in my experience. My friend who is the biggest spender on useless stuff (wants the best of everything type of person) immigrated here from Russia with her family when she was in 5th grade. They lived less than 100 mi from Chernobyl and she got very sick following the accident. For a long as I could remember her parents gave her unlimited money, despite going into debt themselves. Strange that I still remember this from High School, but almost every day she would buy a giant cookie at “break” time and give away half of it. I always had snacks from home at a fraction of the price.

    About three years ago she started telling me how much lattes cost vs black coffee. I knew something was up and a week later I found out her parents had mostly cut her off financially. Finally she had started considering her purchases on a semi-priority scheme (4 black coffees instead of lattes = 1 shirt). She still hasn’t figured out how to really set her spending priorities consistently, but her spending patterns have changed a lot.

    This is in a major contrast to my family. I’m not sure when we immigrated, but it’s more than 3 generations back. Yet from reading this post I feel like we have many “immigrant” behaviors. We spend a lot on big ticket items (think boat, windsurfers, motorhome), but keep costs low in other areas. My dad tells this story about going to the beach with friends before kids. My parents always brought a cooler with ice frozen from the freezer, while their friends would pick up a block of ice for a few bucks each trip. Another thing that stands out in my mind is when I was in high school my dad bought a new truck with cash (we’d never had any new vehicles) and it was considered the “new truck” for about 10 years. He still has it and I’m sure will continue to drive it for a long time. Growing up we ate dinner at home around the table together 5+ nights a week. Tuesday was a “boy scout night” so that was a quickie dinner from leftovers. We participated in a lot of actives as kids… some of them expensive. My parents have always had a garden. What else… the idea of buying bottled water at an event was ludicrous to them (we always had out own), stopping at the store on the way to somewhere was a rare occurrence, we went to a movie as a family maybe once a year, and there’s more I’m sure.

    @Amy #36: “How we can revert back to our parents’ ways is still a mystery! Any ideas?”
    Set spending priorities! Also, spend time on money saving tasks (think: more prep OR give up little convince OR long term planning). Things like bring a water bottle (instead of buying water), pack a lunch, have staples that can be made into a last minute meals at home, gardening, etc. Any of thousands of ideas aimed at being frugal (frugal, not cheap!) while increasing the quality of an experience.

  47. Was raised in a multi-generational African American home. Learned a lot but finances was not one of them. Once I got to college in NYC, I began observing the behaviors of people with money and learned a lot. I was inspired to witness many of my classmates graduate debt free b/c their parents paid for their six-figure tuition in cash.

    I also knew an Indian immigrant who was an investment banker manager. Despite being here for almost ten years working with the same big investment bank, he still lived in Newark, had recently sold off his used/ old car, and seldom spent money period. Now that the cost of real estate has dropped, he’s now looking to buy a condo, but he’s in no rush to buy and is looking for the best deal possible. The man is amazing!

    My hubby is Chinese, and I’ve learned that the Chinese are amazing with money as well. They’re all about businesses, no debt, and not wasting. They pay for their homes and everything they buy in cash. This is why China as a whole has excellent finances. They shun debt. I’ve seen many Chinese with my own eyes make thousand dollar purchases with a thick wad of cash in their hands. Also very amazing!

    One thing I share along with my husband is the need for sustainable, multi-generational wealth. Therefore, we rarely spend and pay ourselves first. We’re taking the best of finance management from the habits of those with money and no debt, which does include many immigrants.

  48. Elizabeth Gage Link to this comment

    I’m a baby boomer; both parents were teens in the Depression. My dad was the son of Polish-Jewish immigrants.
    We did things like bring our own coolers full of food for outings and even cross-country trips. My mom baked a lot but sweets and store-bought stuff were “treats’ meaning not always available (so more fun when you got them.) My mom made a lot of my clothes up thru high school. I think I learned fairly frugal habits — but what I didn’t learn, because my parents didn’t know or think it possible, was “to be rich.” They were completely focused on security and once that was achieved (thru my dad’s tenure at a university) they never really thought about what else money could do. My dad would fluctuate between being a penny-pincher (buying cheap instead of for value) and being wildly extravagant (buying flashy instead of for value).

  49. @ Kelly: brilliant comment!

    As Kelly correctly stated, it doesn’t depend on your geographical origin or whether you’re an immigrant or not, but rather on education and the way you were raised.

    Most immigrants to the USA come from poor, thirld-world countries, and generally speaking, they tend to be the least educated in their countries of origin. This means they are usually poor (that’s why they immigrate to the US). Growing up in a poor household makes you frugal, and you tend to save everything. Growing up in a rich household tends to make you quite the opposite. It’s human nature.

    I immigrated from Guatemala, and I see most Guatemalan immigrants here in the USA working and saving and saving. But I also have some friends back in Guatemala who are up to their necks in debt.

    So it depends on how you want to live. I guess my own ‘values’ or education or however you want to call it make me want to save money, but at the same time I like to enjoy life and not live fakir-ishly.

    It would’ve been helpful for “Raj” to explain what % of his income was he saving. In other words, for the past 10 years, how much money has he made? Then we can figure out if $150K in 10 years is OK or not.

    It seems from his way of writing and line of thinking that most likely he’s making a juicy 6-figure salary, so $150K might be good but not fantastic. Nevertheless, compared to many who inspite of making good earnings are still in debt, Raj’s attitude is commendable.

  50. I can relate with this post very well. I have been in the US for nearly 8 years, 7 of them as a grad student, and one as a postdoc – all with comparatively meager pays. So far I have saved, only investing in CDs, close to 70k. I have never lived with several students holed up in one small house, and have enjoyed going out with friends, hosting parties etc – the full college experience.

    I think the main factor that a lot of other people here also noticed, is the wastage. That was my biggest shock when I moved to the US. For first 4 months after coming here, I worked as a janitor and it blew my mind to see how much perfectly good food people would just waste. Another important difference is buying habits I think. While I always buy not-easily-perishable food (rice, potatoes, lentils, beans, noodles) in bulk, my american roommates and friends tend to buy instant food boxes and cans (which also leads to wastage).

    Another factor is a lot of research before buying anything that you absolutely need, be it travel, gadgets, or textbooks. When my parents visited me last year, I wanted to take them everywhere I had been to. Planning and booking a perfect itinerary took me months, but total expenses for 3 people – 9 destinations in one month, came out to be less than $5000 (which was still way too much according to my parents) – but they were able to see everything from Puerto Rican rain forests to Grand Canyon to Alaskan glaciers, in addition to visit major destinations on east and west coasts, and visiting relatives in obscure locations. I felt rich.

  51. I think the main reasons immigrants save more cash is because they have to go through a period of uncertainty as far as immigration to; path to citizenship is concerned. Also very few of them have a relative or friend who can lend money in case of emergency or any problem. So, no bail out from Uncle John or Aunt Lisa; also it is the money which was earned in true sense extremely hard way and is very difficult to let go.

  52. @asmita

    agree with you – wastage is huge, and thats what strikes you the most on the very first day…

    I see people buying bottled water with lunch every day. EVERY DAY?? It just amazes me… Same for sodas… I take them 3-4 at a time, and use it with lunch.

    @M R Srinivasan

    Yes, immigrants earn money in “true sense extremely hard way”. But so do most others… It doesn’t seem right to imply that it is easy for others…

    @Tony

    Yes, to know how much you earn helps to gauge the level of your savings. I will give my figures since I have talked about my savings.

    My wife and I earn about $180,000 a year (Gross – before all taxes / soc security / meducare / insurance deductions). So, in 3 years, we have saved up about 1 years’ gross – a net saving of 33% (after our very frequent – and often exotic – travels)

  53. I learned from my parents exactly not what to do in regards to personal finance. Parents were first generation canadians who both had professional jobs yet failed to save for the future. Realized at an early age that this was a treacherous path and after reading “wealthy barber” began to pay myself first. Have never gone without and had periods of my life where I was a very free spender yet continued to pay myself first. At thhe age of thirty three am in exellent financial shape with strong equity in three properties and several hundred k in cash savings. I only now work maybe six months a year and plan to relocate to Bali, Indonesia where my savings and real estate investments will allow myself to life the life of a multi millionaire as the power of currency conversion comes into play. My parents are by no means destitute have beautiful homes, decent indexed pensions , full health coverage yet what they could have accumulated over there working careers would have allowed them a more luxurious lifestyle.

  54. My best friends are first generation Serbian-Americans. Depsite their parents business doing terribly for the past year, they somehow found a way to send their son (my friend) to the University of Southern California. We live out of state, and the tuition is outrageously out of our price range. Somehow they are making it possible for him to get the absolute best education possible. They certainly place a huge emphasis on education.

  55. My husband is an immigrant; he refuses to do anything on credit, even though I keep trying to convince him otherwise. If he can’t buy it with cash, he won’t get it. He only has a credit score because I convinced him to give up the pay-as-you-go phones for a cell plan specifically to get *something* on his credit report. Now, he has that and the utilities, but that’s it.

    He recently started talking about going back to school and considering a student loan to fill in what scholarships, grants, and work-based incentives won’t cover. Oh, and whatever his savings doesn’t pick up.

    He’s not frugal or cheap by the typical American definition, I hasten to add. We have had awesome vacations in Europe and in the US that we’ve always paid in cash for with his savings. It’s just a part of who he and his family are. His mother has no credit card, no car payment, nothing. Their house — a little semi-detached in a nice area of England — is paid in full, as is their car. The only revolving credit is his father’s credit card, which he uses once a year for his Manchester United season tickets — and he then pays it off immediately. And they only have that card for the discounts on the seats.

    Once again, the idea they have is that money should be spent on experiences — vacations, sporting events, etc. — rather than a big house and multiple cars and a ton of debt. They’re both 60 and retired comfortably, by the way. I’m constantly amazed by all of them.

  56. To Marie who posted

    As the daughter of German immigrants – these are some things my parents would do:

    …. but I think it’s a much tougher, less enjoyable way to live life. My parents live in a large home, with nice cars, and plenty of money in the bank, but little of anything else. Sometimes I feel it’s a strange pathology that they will never overcome. Their concern for money impedes their ability to have fun.

    I totally agree with this. MONEY IS NOT EVERYTHING… in my
    opinion – it’s disgusting…. I have lots of money, IT does NOT make me happy…. MY kids, my work, and the time I donate/volunteer makes me happy…. Worship of MONEY IS the OLDEST religion… and as Marx says “Religion is the opium of the masses”. It’s very sad… most of these people who torture their kids are not doing them any favors… I teach my kids to save – But I teach them that it’s not BAD to spend on something you want or that you’ve earned the money you have a right to responsibly buy what you want with it. I’m so sad for the kids that have to grow up in one of these house holds… – THEY TAKE the JOY out of living -

  57. To RV (Comments 35 & 52)
    Are you the same RV, who blogs in Tamil and penned this post http://koottanchoru.wordpress.com/2009/11/29/2407/#comment-1711

    Your reference to being a DINK confused me.

    Regards,
    Dondu N. Raghavan

  58. As someone who came to the US to get a PhD, I fall in the category of home vs US. However, it doesnt mean that I dont go out to eat because I wish to save money. It doesnt mean I dont hang out at coffee shops, I just do it in limited amounts because I can and do make my own coffee.
    Also, saying that people are used to much lower standards of living in their home country just isnt true. Most immigrants to US (atleast from India) are atleast middle class with a good education. What you see at home in terms of “living standards” does not exactly affect how you live here. Back home, I never had to wash a single dish , or vaccum. I had a servant who did it, does it mean I hire a housekeeper in the US? No. But then unlike my american friends I also dont live in an apartment by myself where I cannot afford rent and have my student loans pay for it.
    Back home however, I saw my parents save money to buy land and build their own house instead of spending what they didnt have. That to me is the main difference in culture. Indian culture has been to spend what you have, not what you don’t have. That hwoever has changed in recent times. Now people are beginning to show similar patterns of spending in India due to the changing credit policies of banks and due to a younger generation that makes a significant amount of money and has relatively few responsibilities. It has always been so much easier to get loans here than in India. For example, I as a grad student have limits of about 20,000 $ on my credit cards ( I never asked fr them, always pay my cards off) and my dad, a very successful business owner in india, doesnt have close to the same limits inspite of being in the highest tax bracket of the country.

  59. @Dondu:

    No… But I guess there is some similarity between him / her and me? (Sorry, I don’t read / understand Tamil, so couldn’t learn more about the blogger). If so, I am glad more people are doing the same…

    (I am sorry, I would not like to reveal my identity as I have mentioned my income / savings… We Indians are usually secretive when it comes to money… :-) )

  60. @R.V.
    Yes, the feeling was bizarre. Your language reminded me of his. He too lives in the US of A!

    But then he has two charming daughters, hence my confusion.

    By the way, I have placed the same question to him in the above cited blog.

    Anyhow thanks for the reply.

    Regards,
    Dondu N. Raghavan

  61. So interesting. I actually just wrote a blog post last Monday about my husband’s views of money and how they were influenced by his childhood in Argentina (during times of both national and family crisis). As you mentioned, at first he was not at all concerned about saving for retirement, but as he has assimilated, he has increasing interest.
    We do send money to his family, but not at a rate that you could say we are supporting them — probably something like $1,000/year. This does go a long way, but it’s usually in the form of bringing one of them here to learn English.
    In the area of education, my husband was taught well by his family, but did not complete a post-secondary degree in his own country. I would say, just as you learned habits from things like your mom packing lunch for your family, most people learn these habits from their home environments.

  62. There’s a flip side to this. As a volunteer alumni fundraiser for UC Berkeley, Indians and other Asians are the stingiest to charitable giving. For the number of Asian graduates in the sciences/engineering that have well paying jobs, it’s a cultural thing to not think about charity. All the money in the world does not change the image of a parasite.

  63. @Rahul I also see that in the case of my husband (see just above your own comment). He does not have much interest in making charitable giving a budget category. (Neither does he protest much.) I’m not sure that carries across Latin America, as I know that Catholic charities are very active, but I know that there are comparably few active charities in his region of Argentina. So, his opinion is not based as much on his status as an immigrant as his background. However, it seems to me that if one’s goal in moving to another country is to increase his financial status, it may follow that he may not be as charitably-minded. Also, if one is sending money home to support his family, this could be seen as accomplishing the same goals.

  64. Ramit, i’m Hispanic, Debt Free Hispanic, and I must say that I love this blog post. There is a big difference in spending habits, even between me and my own father.

    I remember times when my father would send money back to his family in Mexico. My father became a US citizen but was very loyal to his mom back in Mantamoros. He would send her money up until the day she passed away.

    My parents do not spend as much money as I do. They eat meals at home alot and take leftovers to lunch almost daily. I know this because when i’m town I ask to take them out to eat and we often talk about eating at home versus at local restaurants. As you know beans and rice is traditional in a first generation Hispanic family. These side items are affordable and sure beats eating at a restaurant.

    My parents have done well and have a paid for home. They are business owners so they pay for health insurance but other than that, they save it.

    They will not receive social security money nor do they contribute to a retirement account, because as you mentioned, when that time comes, we (their sons) will step in and help out wherever we can.

    Putting parents in a retirement home is often a big no-no in Hispanic families, so my parents are not even thinking about that.

    Anyways, thanks for the blog post, thought i’d share my debt free hispanic thoughts.

  65. One big reason for the difference in savings is many people from other nations, especially emerging market economies, have no safety net like we do here. They don’t have social security or unemployment insurance. You may feel bad that they don’t, but you find these societies have savings rates in the 20% or more. They are actually better off than we are, especially when you consider the government’s mismanagement of our social security contributions.

    The family structure is much stronger in these areas. The families depend on each other for more than just emotional support. They rely on each other for financial help as well. It is probably why divorce rates are lower in these areas as well. Americans use to be like that when we were a mostly agrarian society. The husband and wife wouldn’t divorce, not because of religious beliefs, but because each had a job to do. The man was needed to raise the crops, and the woman took care of the living environment. If one of them disappeared due to death or divorce, life got real hard. This is why these couples had lots of kids who were required to help. The kids usually took over the family farm and took care of the parents as they aged. The immigrant families are still reliant on each other for this type of support even if they aren’t farmers.

    I also think they haven’t been Americanized in that they need a bunch of useless crap like HD TVs or 500 movie channels. You start to see younger generations of immigrants become more Americanized as they are exposed to the lifestyle through school and friends. So this idea of thrift wares off as families move from the immigrant status.

  66. I hope you backed up that file, Anand!

    One theory I learned as to why immigrants save more money is that it is caused by the “sojourner effect.” Although I don’t see this term anywhere when I tried to search for it on Google or Wikipedia, I promise I’m not making this up. I did learn about it in a Race Relations class at the University of Chicago back when I was in college. I remember that it is a theory described by a sociologist named Bonacich, I think. Many immigrants may not see the U.S. as their home and are always planning on moving back. So they come, make a lot of money, and move back. If you know you are not going to stay somewhere forever, it doesn’t make sense to buy a large house, fancy cars, or get too many nice things, even if you do end up staying for 20 or 30 years or more.

    (There’s a book called Immigrant America: A Portrait, by Alejandro Portes, that touches on this subject.)

  67. Great comments, they pretty much described everything I could think of saying.. It’ll be interesting to see how lack of savings for retirement will affect immigrants in the future as their children become more and more ‘americanized’ thus not performing their ‘duty’ of taking care of their parents..

  68. I don’t know, but I know among the people I grew up with in NJ the ones from more affluent families (especially ones that don’t have their own family businesses, but have normal jobs) tend to be the biggest money wasters. I think the more secure one feels when growing up, the more one is likely to be a spendthrift as an adult. Moving to a different country, or seeing your parents work hard to run a family business, or growing up with less money than others, are all sources of insecurity that might lead people to save more and acquire better financial habits as adults.

  69. I was just reading about how you can get a chauffer, butler, gardener, etc. in India – how come more Americans don’t do that?? For my small NY apartment it sounds like I could be living in a castle or something.

  70. I don’t think immigrants specifically save more. I think it’s a sign of where you grew up and in what era. I know people that lived through the great depression are some of the thriftiest bastards I know. My grandma, who lived through the great depression, to this day counts all the proportions before each meal and never cooks more than needed. You end up more hungry after dinner than when you sat down.
    Americans need a wake up call. Yet, I know affluent indians who have no problem not sending in $100 rebates or eating out every other day. Personally, during my childhood my dad was a Ph.d student and a Post doc. Only when i was 15 did he become a professor and started making a salary above poverty levels. Thus, today I’m one hell of a thrifty bastard. (Though, I do tip decently).

  71. A huge distinction needs to be drawn between 1st generation immigrants and successive generations. Growing up, across the street from my dad’s house was a block of 4-plex apartments and while the grandparents and older parents who came over to the US worked hard and were respectful of the neighborhood- the kids just left stuff like bicycles and toys out on the street or in the yard. If their bike got a flat tire they would just go buy a new bike.

    Another huge difference is their relationship to debt. For some odd reason it has become “normal” to have high interest credit card debt, and even just debt in general. Like you write in your book- it’s simply not sexy to save money and live within your paycheck! However, I don’t totally agree.

    I think even people who have credit card debt have to live within their paycheck. But instead of paying themselves first and creating a savings account that acts like a credit card (when you need to spend more this month, you take it out of your account rather than spending more on interest!).

    Another big thing is housing. Why is it that American society says you have to move out when you’re just out of high school and start paying to rent an apartment? And why is it normal to spend $400,000 on interest just to pay off your $200,000 home mortgage over 30 years? And why is it normal to then pay a lot of $ for childcare? Why not have your grandparents live with you in a larger home and have them help out and watch your kids (making it more fun for both the kids and grandparents/something to do) and when you come home from work they could have helped out around the house! Also, that saved $ could go towards having a larger home that can fit everyone comfortably.

    And back to the point about young adults moving out so fast- what if parents offered them the chance to stay at home but charged a discounted rent (like $300/mo) but then put that money right into a savings account to help the kid when they want to buy a house! If the kid stays at home for a little over 3 years that’s nearly $10,000 for a nice down payment on their first house. And then encourage them to get a house that can accommodate roommates! Even if that means buying a larger house, the offset price can made up pretty easily.

  72. @Lee:

    “I was just reading about how you can get a chauffer, butler, gardener, etc. in India – how come more Americans don’t do that?? For my small NY apartment it sounds like I could be living in a castle or something.”

    I wrote about a chauffer, butler, gardener, etc. in India, so let me clarify.

    The cost of living is extremely low in India. Also, costs in India are quite low compared to other developing countries it is compared with.

    For example, I have been to Brazil – which is in the same stage of development as India – and found that the costs there are about a half or a third of the costs in USA.

    Compared to this, the costs in India are a tenth of that in USA – which is really cheap! Health services, telecom, hotels, manual labour – all with quality comparable to USA – cost a lot less in India.

    Let’s take the example of a cateract operation for an eye. Such an operation in India costs Rs. 100,000 in a good hospital. This is about $2,000.

    Coming to the services I mentioned earlier. A chauffer costs Rs. 5,000 a month ($110). A full-time butler costs Rs. 3,000 a month ($65) (you provide for the food over and above this, and he stays in your house). A gardener costs Rs. 500 a month ($12).

    I am sure you get the point.

    But there is another side of the coin: the earnings in India too are no where near the salaries here – and therefore, a direct comparison is meaningless.

    For example, as I mentioned, my gross salary here is around $90K. Back in India, it would be around Rs. 1,400,000 or $30,000.

    So, even these lower costs don’t seem all that low :-)

    (BTW, I pay a rent of $2050 a month here – it would be about $400 in India!).

    So as I said, a direct comparison is meaningless.

    But, and this is a big BUT: It makes tremendous sense to earn here, save here, and then move to India. Coz then, you take your higher earnings and high savings to a low cost country! And that is exactly what I am doing. Thats why I would be able to afford all the luxuries…

    Why are more Americans not are doing it? Because money is not everything!!!!

    (Although I have read about many Americans moving to Thailand, Indonesia and Mexico for the lower cost of living).

    A change in country also means a change in a lot of other things – biggest of them being culture. If you are used to things being one way in USA, its difficult to adjust to it being any other way… And a lot of things change if you move to India.

    For me, this is not an issue at all, because I am from India and have lived all my life in India. So, I am a fish-in-water in India :-)

    But moving to India is something that more Americans should definitely consider… Its a great place to live, if you can live with some changes…. (Am saying this as I have seen life in both countries).

  73. @Rahul. being a cheapskate Indian is definetly and inherited trait. My parents were typical Indian cheapskates. They were always measuring themselves by how much money they could accumulate. It was money, money and more money. It’s what the whole community defined themselves by.
    I find that I practice this same habit with other Indians. Sometimes, four of us go to a restaurant, order only one entree and stretch it to feed four by cajoling the waiter into giving us some bread. I used to do this also when I was with my american friends. I would only order a very cheap appetizer and eat whatever bread came on the table. i bet Ramit does the same thing. The only bad part is that my american friends would be very embarassed and stopped inviting me for lunch. But I don’t care. I’m learning how to be rich!

  74. I have a friend, born in Burma, who lives with his family here the US. They live on one income, travel frequently back home, and he sends money back home all the time. On one income! I asked him how and he will tell you that they live by extremely frugal means: 1 bedroom apt, no eating out, clothes are bought fairly cheap, they tend to keep at home, etc…

    As a native USer, I’d have to say we are spoiled and expect to be spoiled. Our consumerist society reminds us kindly all the time. I think it would be great to adapt an immigrant’s mindset when it comes to money – but now it’s talking my family into doing the same.

    Also, it seems people who migrate here don’t hold a fear when opening their own business. They just get out there, start it up and go with the flow. We take the US for granted, where as others see the ‘freedom’ that we are taught in school.

  75. I’m an immigrant and I agree with the title of the post. Immigrants do save a lot more than Americans and are generally more disciplined financially. At least thats what I have been doing and have seen my friends doing. Often when we have told our credit score to some americans we hear them sighing, “I wish I had that credit score”.
    Anyhow, coming back to the point, why do we save so much?
    For me, I feel a lot of pressure from the society back home in India. For an average Indian, living in US is still a very big deal and the expectation is that if you’re living in US you must be making money.
    So I feel I better save enough so that, if I ever go back to India, I can lead a respectable life, even if I don’t get a high paying job there.
    At least thats my reason of saving aggressively.
    I don’t mean to say that I won’t save anything if I didn’t feel this pressure, but I find that I have become much more disciplined about money after coming to US as compared to when I was in India. That sounds counterintuitive but thats been the case with me.

  76. I agree with almost all of the comments made. Their family units tend to operate differently. Members seem to be more vested in mutually agreed upon goals, many of which are cultural / traditional. Family will own a business and hire only family members to work in it. Long hours are expected and accepted. Children don’t take school for granted and so on. Often they send for older relatives to handle in-home child care. I’ve often seen this. It makes it possible for women to work longer hours with a lot less stress, worry, and expense. Many of the women, though they look nice, don’t seem to spend as much on personal care, like pricey hair salon processes, make-up, and clothes. If one travels internationally, it’s easy to observe how others’ spending habits are much more low key than those of Americans. At the same time, marketing and advertising in other countries is much less intense. One isn’t constantly brow beaten to keep buying more and better to the same extent that occurs in the U.S. Everyone, no matter what their status, lives with less stuff. On the other hand, younger generations who live in this country seem to succumb to all the temptations of the materialistic American lifestyle, turning their backs on most of the thrifty habits of their ancestors.

  77. I’ve been somewhat disappointed with the thread of comments. I thought this topic was very interesting and would attempt to dig deep into the cultural and psychological differences.

    To give some credibility, I’ve saved almost as much as Raj in a portion of the time on a modest salary, yet am far removed from my great-great parents who emigrated here.

    Two side points. Remember, the transition to credit is a relatively new trend in the US (estimate to within past 50 yrs). This is why you have comments here about the Great Depression generation and how thrifty they were. What about addressing the impacts on savings in these other countries where growth is booming? Isn’t it possible for the same type of consumerism to (eventually) occur in China and India?

    Maybe the post should have instead looked at a single culture, and then focus on the differences in saving habits within that group. Examples: Habits are passed down through generations, but usually diluted – how does it change across generations? How does one’s career affect their spending (do engineers/doctors spend more than others)? Same with education – how does it affect? And of course, where does location factor in? Are you more likely to assume the savings habits of your host country or do you defer to your home country?

    Help me out on “Case 2” (@ R.V. particularly). To me, this doesn’t convert 1:1. How can it be said that immigrant savings is better if making sacrifices and saving aggressively now only results in returning to their home country and leading a life of luxury? PS – I was in Nicaragua for a bit, and we even had a security guard 

    To me, this equates to “saving for a goal”. The habits aren’t necessarily general (saving no matter the goal) nor permanent (disregarding the currency conversion, will you still financially deny yourself in India? See post #43 & 70). This is where I thought the conversation was going. There are a lot of good posts about people whose habits have been FUNDAMENTALLY altered by some cultural difference (ex: See posts #58, 65, & 76 to name a few).

    Another interesting concept was addressed in Post #47 along with others (sorry for not giving specific credit) – the idea of “multi-generational” wealth. This has been something that’s COMPLETELY escaped American culture as evident in Post #28 when talked about moving out at a young age.

    Not only are families not working together, but instead of making the sacrifices now for future generations and teaching them the respect for hardships there’s this “I had to do it on my own, so you’re on your own” mentality. Any real wealth is built and destroyed within generations. The only remaining generational dynasties are the Rockefeller and other industry-titan families.

    Anyway, if we can redirect back to towards how cultural stigmas/beliefs form our habits, I’d like to hear what people think!

  78. Ramit, I think a big factor that you’ve overlooked here is education cost. You didn’t offer much details for “Raj” and his background, but let’s look at commenter R.V. and his wife. They both have undergraduate and MBA degrees, which I’m going to assume they earned in India and not in the United States. Based on the information I was able to find, it is almost certain that, between the two of them, they didn’t pay more than $25,000 USD total for their education. And now they have a combined income of $180,000 USD per annum. Contrast that with your typical individual educated American who graduates four years of undergraduate studies with approximately $25,000 USD in debt (not cost, debt) and earns only approximately $43,000 USD per annum. Essentially what I’m saying is that ability to save is a much bigger factor than any personal or cultural propensity to save.

  79. We had similar upbrings, and my family was born in Amercia, We never had a summer home, fashionable clothes, but my parents would not spend money on activities for my siblings and me, or for a SAT prep course that cost thousands of dollars.

  80. I am an Indian and have been in the US for almost 7 years. Though I am not a savy saver, I learnt the lesson hard way and do have my finances under control now.I come from an above middle class family from India and my parents gave me what ever I wanted or asked for while I was there. I came here only to realise that people who came along with me saved more than I did, becuase they came from not so previleged households like I did.

    I have my friends in India that come from rich families, who do not even goto the sale section(they think it undermines thier”status”).They buy everything while its expensive. Though it makes me wonder how stupid they are to pay more for something that could have paid less instead. Not a trait of a true money maker..but what the heck thier parents did all that for them.

    We cannot generalise anymore, people are changing , habits and traits keep changing between Indians who have lived here long, or have been here recently or been born here.

    One thing that I most commonly observe is that people who come here to work. They save like there is no tomorrow. You go to their homes they do not have a place for you to sit but they have hefty bank balances than most of us do.

    But once these people go back you will find them living in most expensive houses and enjoying expensive luxuries. For most Indians , what americans around them think doesn;t matter..what matters us nost is what our “Indian community” thinks about us and that’s what motivates to save..save..save….and live frugally

  81. It’s all about culture. I am Western European (born and still living here) and ‘everyone’ here my age (mid to late twenties) seems to be saving to buy their own house/appartment, even total losers you’d never think that would. Priority number one here is getting your own home, then comes a combination of general saving and having a good time, and last come gadgets. In the US, priorities seem to be the other way around (my impression).

    Relatives emigrated to the US half a century ago, and you see the change throughout the generations. Generation #1 worked hard and had fun but didn’t have expensive hobbies. Generation #2 earned very well, lived very well (boat, summer house), but were selectively frugal and thus managed to retire early. Third generation has more gadgets than they can afford. At the time I was looking to buy a laptop, and it was funny how they tried to convince me of how awesome MacBooks are. Sorry, but I just couldn’t be bothered. I went for a low-end Dell. It’s a stupid laptop, people!

  82. [edit: it's just a laptop, people!]

  83. @Trendy Indy

    I think you found the core. “For most Indians , what americans around them think doesn;t matter..what matters us nost is what our “Indian community” thinks about us and that’s what motivates to save..save..save” and show off to them.

  84. many people know how to earn money, but few know how to save money that makes more difference

  85. money earned is not always spent by every one equally, needs and desires changes from individual to individual

  86. Hmm I don’t know! I am an immigrant from India and I’ve been in the US for 3 years now (2 of which were spent in grad school) I was used to a luxurious life back in India – eating out, movies, buying clothes every month. And I do the same here – I have saved just $10000 from a year of working at a high end software engineer job

  87. @Jesse:

    I kind of agree that in a way, this equates to “saving for a goal”. However, these habits are permanent – and not just for the current accumulation / saving phase.

    Even when we move back to India, the principal would remain the same: Spend a ton on what we love, cut costs in everything else. Every drop counts. Small savings add up.

    Let me take up some of my own points:

    - We pay a rent of $2050 a month! >> We own our own apartment back in India, so no rent. Instead, a mortgage payment of a modest $300 a month (20 year mortgage – the most common tenure in India for ) (The apartment was bought in the pre-property-boom phase, so the mortgage payment is low. Payment for it at today’s prices would be abour $800 a month)

    - We love to travel >> We would continue doing this back home

    - Each trip is meticulously planned, and we book tickets on the most value-for-money flights / cruises >> We would continue doing this back home – doesn’t matter whether we are rich or middle class. Not planning equals wasting money…

    - We drive a car that is a lot more modest compared to the cars driven by most people in our income class >> Again, this principal would be followed in India.

    - We don’t buy from department stores, we buy from discount chains >> Unfortunately, we don’t yet have discount chains in India. But we would always prefer sales and special events.

    So, as you can see, its again the attitude about saving, rather than maximizing saving during a short period in order to achieve a goal.

    But yes, when we have more money, we would spend on some things that we would not have spent on earlier (butler, driver, etc). This is not just because we have money, but because we think it is important for us – just like travel. Just that we couldn’t afford it earlier!

    BTW, I am known to have huge stacks of plastic bags (runs into 100s!) at my home, both in India and in the US… Coz I can’t get myself to throw away prefectly reusable bags! I use them as trash bags, and for carrying lunch to office whenever I am getting it from home…. Am glad to see there are other people like me :-)

    @Danny:

    Yes, you are right – we did our MBAs from India, and spent about $15000 on our graduate degree + MBA for both of us. (The costs have gone up since, and it would be about $15000 each today)

    And not to forget the fact that that entire money was FULLY paid by our parents… So, absolutely no debt even after our MBAs.

    Again, this (parents paying for education) is a very cultural thing – as pointed out by many in their comments. We, in turn, are saving up for educating our kids!

    (I don’t know the American society too closely to comment on this, but in some TV shows and movies, I have seen references to parents starting to save for kids’ education / weddings, but ending up buying a vacation home or a boat!

    Something like this would never happen in India – if necessary, parents invariably sacrifice their happiness for a brighter future of their kids. I believe this – less individualism, more giving – is Asian culture in general)

  88. @ RV. Thanks for following up. I hope you weren’t offended by my text, I simply selected your post because the butler comment was an easy counter-point.

    Two add-ons. First, its good to see someone who shares my interest in collecting trash bags. The logic is clean. Why would you pay for plastic bags only to throw other plastic bags in them? I have to thank you, I think I’m going to draft a post about this :)

    Second, your point about planning is spot on. People rarely stumble on fortunes. Pre-planning contributes significantly to actually achieving goals by allowing you to measure, track, and reference your baseline. On the opposite side, it helps to prevent missteps through anticipation and adjusting for large shifts in cash flow.

    Best of luck to you and your wife in the future.

  89. I’m a fifth generation American and I can say that I am definitely amazed at how people in this country live their lives. I can’t imagine what its like for an immigrant to come here and see people just blowing money away on useless crap. When I moved to Metro Detroit from a small town in Northern Michigan it just amazed me how people aggressively try to outdo each other in house, car, clothes. I suspect its like that in most suburbs in this country.

    Some of my friends are changing their ways due to the recent economic troubles, but will it be a long term change? Who knows.

  90. Hi
    I have been following your blog for a while and have started to look forward to reading them every week. This was a nice line of thought you have put across(being an immmigrant I can relate to this easily).But you have only highlited the positive side of this topic in this artilce I feel.
    Strongly tempted to buy your book.
    Keep writing ..

  91. An allowance? I think I would have been smacked for that.

    Growing up in a Somali household is no different I guess, save like your life depends on it! Often times it does, bc family members back home really need it and they are your blood.

    Everyone pitches in to get the younger generation educated. And once you have enough for a down payment buy a house. Usually families have one car if public transportation isnt so good.

    Usually the family, friends, neighbors start whats called a Hagbaad which is a revolving credit system usually used for a college education, big but needed purchases, starting a business

    Now if only we could do this back home! lol

  92. [...] I Will Teach You To Be Rich asks Why do immigrants save so much more money than you? [...]

  93. Hi,
    The blog topic is very correct. Immigrants save more money. All my cousins have been to US 3-4 times. Though they came to US in business visa’s (using which you can stay a maximum of 6 months) i they were able to save Rupees 2 to 3 Lakhs ( hundred thousands), which equals to their annual CTC. So they have invested that in long term deposits which gives them 8% interest rate or buy gold coins and kept at a locker which can be redeemed any time. Nobody in this comments thread have spoken about how these immigrants save this money.
    My brother got 2 ground land in suburb Bangalore for Rs. 80 Lakhs which roughly comes upto $ 150000. With another 30 lakhs he can build a palatial mansion and enjoy his days leisurely. All his things were bought with Cash. He en-cashed all the gold he bought over the period, closed all the long term deposits. This all stems from the fact that Asians hate having beholden financially. What you want – you save for it and buy outright. That sums up my comments- :)
    Note: Even people who have returned from USA to India does some consulting work …as white collar work can be done anywhere

  94. There’s a lot to say about savings & culture. Good for Indians who save money! HOWEVER:

    - Someone said Indians not do not tip, someone else said Indians save even the babywipes, and someone else even said that Indians won’t spend money on toilet paper because they don’t use it. Some others say Indians who do not accommodate to American standards are a subclass — like the untouchables back home.

    - As an attorney, I have worked with Indian clients twice. What a pain in the @$$. I promised myself to never again waste my time with nickel-and-diming. I refuse to work with Indians as much as waiters refuse to serve them and –as some Americans– refuse to shake hands with them (for healthy reasons).

    - But again, if you’re a saver, good for you!

  95. [...] a financial blog for cutting corners, but it gives all kinds of economics, jobs and career tips. 49. Why Do Immigrants Save So Much More Money Than We Do – You see the success stories of immigrants to our great country. Now here’s [...]

  96. I’m the son of Taiwanese immigrants, and my mom always says: “Chinese earn $10 and spend $2, Americans earn $2 and spend $20.”

    I think she sums it up rather well.

    Like another Asian American has commented, I can only hope to TRY and be anywhere near as frugal as my parents — and I see many of my 2nd generation peers at all income brackets wasting a ton of money.

  97. I think the reason why immigrants do so well is part due to coming from lesser circumstances in their home countries. When my family got here from Italy they all got into trades or bought rental property or opened their own businesses, etc…Things they couldn’t have done back home. My grandmother always beat it into my head that you just can’t spend what you dont have. Also, Credit cards are like a mythical beast to some immigrant families =P

  98. Commenter # 95. That post is out and out racist. This is a great conversation about immigrants and financial habits….This is neither an opportunity to pay homage to a particular race/ethnicity nor to put them down in a manner that quite simply smacks of racist beliefs and convictions.

  99. I HONESTLY BELIEVE SAVING IS A JOKE…. IM NOT SAYING SPEND YOUR MONEY BUT WHY SAVE 150k WHEN U COULD OF TAKEN THAT SAME MONEY AND INVESTED OR Bought INTO REAL ESTATE AMONGST OTHER INVESTMENT VEHICLES
    (start a business,stocks,Bonds,Gold,a Growth Area) . Besides the fact that inflation beats down your money when you have it saved in a bank , the bank uses you as a Leverage to get into other businesses. As far as being frugal i believe being cheap doesn’t have to do with being rich or poor .why be frugal when you do need expenses and spoiling your self once in a while is good for the human mind. Im not condoning to keep up with the joneses or stop paying bills to buy luxury but why save every dime if you can die tomorrow. and i know there will be many people who disagree with me and thats the reason why 99% of people lack the wealth and 1% have it. I also don’t want to Hear that all these investment options are Risky , its just as risky as walking the street , as getting a new job and LEARNING HOW TO DO YOUR JOB . But with the financial investing options you need TO LEARN MORE ABOUT IT, the more KNOWLEDGE YOU KNOW THE LEST RISKIER.

  100. It’s common that guest works harder and save tougher than the native.

  101. I was not raised with any financial sense whatsoever, it was only until I got myself into trouble did I realize the need for frugality. Unfortunately, I’m still learning it.

  102. I work in an office that’s 50% Chinese and 50% American. We just started a 401(k) for our employees, and none of the Chinese are participating, although I know that many of them having much larger savings accounts than me. I think that Chinese culture privileges the “money under the mattress” approach to saving. I’m not sure which is better in the long term, but I guess many of them believe that their children will care for them when they retire, whereas most Americans know that their children will not.

  103. Barbara Saunders Link to this comment

    I wonder – does this generalization apply to all (or even most) immigrants? Most of the examples here are of immigrant families from China and India. Some friends come to mind who immigrated from Europe or the Caribbean (all upper-middle class families with good financial outcomes.) Although they are definitely less impulsive than typical Americans in my experience – and less often buy a lot of branded junk just for the name – they are not tight-fisted in the ways described here.

  104. Barbara Saunders Link to this comment

    Another comment – earning tends to get left out of these discussions!

    If I make, say, only $50K, and my husband makes, say, $50K, then we cannot save $100,000 per year. No way, no how.

  105. My dh is from an African country with a life expectancy of about 45. He and his family members do not save! Life is short, and if you have money to make it more enjoyable: do so! Retirement is not foreseen, because people just are not expected to live that long. He is slowly adapting to a more savings-savvy lifestyle, and I’m adapting to a more spendy-savvy lifestyle (my parents are the proverbial Dutch frugalites). Money is often discussed, and generally we agree on what to spend it on/save it for.

  106. [...] Ramit, from a while ago, on why immigrants save more money [...]

  107. I’m British by birth, and try to go by my Grandma’s creed: if you can’t pay cash for it, you don’t need it! No “HP” (hire purchase, or credit) for her! Do I use a credit card now that I live in the US? Yes, but pay it off each month, and get rebates on what I spend on it (American Express, through my Costco Executive membership card – which also gives annual rebates). I also grow my own veggies, use the library, instead of buying books, and only buy on sale. And I save, so that I can travel!