Asian Americans are often misperceived as financially well prepared. They seemingly take all the proper steps toward financial wellness and the American dream: they go to college, have a good job, and focus on saving. You could argue that, in some key measures, they may be one of the most successful U.S. demographic groups in terms of education and median income. However, speaking as an immigrant from Hong Kong who has been in America for over a decade, that perception is not always the reality.
As an Asian American, it has been a challenging journey when it comes to financial wellness and empowerment. For example, in Hong Kong, credit scores weren’t widely used. In fact, until moving to the United States as a young adult, I didn’t know how vital credit could be or how long it could take to build a solid credit history. Similarly, I thought I was doing a decent job of preparing for retirement and was shocked to realize how much more I had to save if I wanted to retire at my desired age and income level. (Retirement calculator)
My revelation was that, despite a large degree of career success and stability, I needed some financial wellness lessons. And, as it turns out, this sort of financial literacy shortcoming isn’t unique to me.
Financially most well off, but least optimistic
Asian Americans as a whole do have a measure of significant financial success. Indeed, a recent MassMutual multicultural consumer research study found that Asian American respondents were the most well off financially: 61 percent of Asian American respondents are affluent vs. 42 percent of other respondents.1,2
Based on that finding, many might think that Asian Americans should feel positive and secure about their financial situation overall. Surprisingly, though, the study found that the reality is quite the opposite; Asian Americans are more likely to feel negative, anxious, and stressed when thinking about their financial future.
- They are the least likely to be comfortable with their current financial situation (29 percent Asian American of respondents vs. 42 percent of other respondents).
- They are the least hopeful about reaching their lifetime financial goals (43 percent of Asian American respondents vs. 61 percent of other respondents).
When we take a closer look at what actions Asian American respondents have taken to achieve financial well-being, the MassMutual study revealed a major gap between the general perception of Asian Americans’ financial preparedness and the reality of where they stand in the overall American population.
- Asian Americans often have a higher income and more investable assets to protect; however, only 1 out of 4 works with a financial professional.
- Asian American respondentsare less likely to consider a variety of financial products (24 percent of Asian American respondents would not consider vs. 16 percent of other respondents).
- In terms of the financial products they own, Asian American respondents are very focused on retirement, but are the least likely to have life insurance protection in case the unexpected happens.
The “model minority myth” — the notion that a certain minority group can be particularly successful — overstates the success of Asian Americans. In fact, it is unfair and misleading in homogenizing the Asian American experience. Despite their higher average household income and education level, Asian Americans, too, struggle with cultural and language barriers, limited access to financial systems, and rising racism — especially during the pandemic.
In fact, there is evidence that the impression of Asian American financial success may not reflect the reality of lived experiences for many. Research indicates that there are many challenges faced by the Asian American community that might go unnoticed by the general population:
- Income inequality is the greatest among Asian Americans due to significant variations in wages, employment, and education.3
- Asian American white-collar professionals are the least likely group to be promoted into management — less likely than any other race, including Blacks and Hispanics.4
- A quarter of Asian Americans who are middle class have had a significant reduction to their income because of the pandemic.3 For example, in New York City, Asian Americans had a jobless rate of 3.4 percent at the beginning of the pandemic in February 2020. By May, the rate had surged to 25.6 percent, the largest surge among all major ethnic groups.5
Navigating through a financial journey isn’t easy for anyone. Yet, building financial literacy and learning what actions to take to help us achieve our financial goals is an essential step to help bridge the gap between financial wellness perception and reality. And, on a general level, that’s what it will take to eventually overcome the financial disparities for multicultural communities that are so prevalent in America today. On a personal level, the recent pandemic is a wakeup call that I need to build a long-term, holistic financial plan. While there’s no such thing as one right answer, the key to success is to start asking what I want and how to get there — whether it is to save more for my children’s education, create my retirement strategy, or protect my loved ones.
Discover more from MassMutual …
1 Multicultural Consumer Study, conducted for MassMutual by LRW, A Material Company, October 2021.
2 "Other respondents“ comprises a sample of middle class and affluent White, Black, Asian, and Hispanic respondents.
3 Pew Research Center, “Income Inequality in the U.S. Is Rising Most Rapidly Among Asians,” July 12, 2018.
4 Leadership ceiling: Analysis of national EEOC workforce data, 2018.
5 Asian American Federation, “The Impact of COVID-19 on Asian American Employment in New York City,” 2020.