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Saving Money
Photo by Stephen Phillips – on Unsplash

In this article, I’m going to reveal the Chinese secret to saving money. Now I’ve gotten a lot of these money-saving tips from a friend’s dad who’s your typical good-with-money Chinese person, and I want to share with you those today.

The most stunning fact about the Chinese is that in China the gross savings rate there is 45.9% as of December 2021. That means for every $100 that they bring in they’re going to be saving roughly $46. In contrast to the United States where there’s a heavy focus on consumption, the savings rate is typically between 3.5% and 5%.

Why The Chinese are Excellent at Saving

So, what’s the reason for this big disparity, I mean that’s almost a factor of 10 that we’re talking about here, why are the Chinese so good at saving money? First, it’s cultural, Americans are always being hit with sales, discounts, financing options, and the like. They’re always kind of pressured to keep up with their neighbors.

A lot of this originated After the post-world War II era, it was not long after the Great Depression and it was deemed patriotic if you were actually to consume in America at that time, so they were trying to spur the economy on.

In China it’s very different, they have a heavy emphasis on saving money because of what money means to them as well as the demographics of their country. You’ll also find a heavy aversion to financing things in China. Oftentimes, Chinese people want to buy things fully in cash instead of trying to finance them and take on debt.

Now, if you’re just looking for the Chinese secret to saving money, you can scroll down below so that you can just skip to it if you want. However, right now I’m going to cover why, and why Chinese people save money. I think it’s really interesting, and if you understand intrinsically why Chinese people want to save money it can help you save money as well.

Why the Chinese Save Money

The first reason why Chinese people like to save money is the meaning of money and what it means to them. As kids, they’re taught from a very early age that saving money is honorable. Kids will often get money in red envelopes for New Year’s and birthdays, and they are often encouraged by their parents to save it. This money is referred to as lucky money.

Money is so important to the Chinese that they even have a phrase during the holidays and New Year that says instead of Happy New Year they say something else “Gong Xi Fa Cai” meaning “Hope you get rich”. That’s pretty funny because it’s also true.

You can also see the importance of money in the way that people in Chinese Society treat other people with a lot of money. People with a lot of money in Chinese culture are deemed successful in many people’s eyes and so it’s often viewed as a good thing to have a lot of money.

The Other Perks

Being successful also has its other perks in China. Up until 2016, China had a one-child policy that was implemented in the late 70s and early 80s to tackle overpopulation. That means each family could have one child, if you had more than one child you would just be slapped with a fine.

In addition, if you didn’t pay that fine your household would not be able to register your second child’s name in the household system, so your second child would not be eligible for health care services and other services like education.

Naturally, this one-child policy created a sharp decline in newborns and also in sex-selective abortions. In China, it’s usually much more important to have a boy than a girl because the boy usually inherits the family name as well as the property.

So what you had was a lot of people kind of using contraception in a way that they would avoid female bursts, and try to optimize for male bursts. With that contraception, actually, it skewed the population having more males than females over time, at its worst it was 122 males for every 100 females that were born.

In general terms, if you have more men than women then you have a supply and demand issue, so there’s more men chasing the same amount of women. Basically, to stand out as a man in China you have to be viewed as successful, AKA you probably have a lot of money.

Recommended: Here’s How to Save While Spending

Other Reasons

The other thing with the one-child policy was that since families were only having one child they weren’t having multiple kids in the majority of cases, which means that the parents could save more money because they didn’t have multiple kids to feed. You kind of had a double whammy with the one-child policy, you had parents not having to spend as much money, and then the males trying to save as much money to become desirable.

Another reason for saving in China is that there is no 401K, there’s no IRA, and there are no retirement accounts that Chinese people can contribute to. Instead, they do have what’s called a pension system, but still many people in China are wary that the pension system will still be around when they retire. They also worry about the cost of healthcare, education, and their pensions.

These are some of the main intrinsic reasons why Chinese people like to save money but let’s talk about the money secret of this post.

The Secret

The main secret as to why Chinese people are brilliant at saving money, it’s not anything crazy it’s just that they have every dollar accounted for. There is a special budgeting system that can help you with this and in America and in Western countries it’s called the zero-based budgeting system.

The zero-based budgeting system is a method in which you budget where you spend every last cent of your monthly income so that the amount left at the end of every month is equal to zero. That means your income minus your expenses equals zero at the end of the month. Expenses in this case also include savings, Investments, paying off debt, Etc. Let’s pretend you make $4,000 a month, a zero-based budget might look like the following;

Eating Out$200
Utilities + Bills$200
Emergency Fund$200
Student Loan$125
New Car Fund$250
Left Over$0

You have your rent, your groceries, and your necessities all listed on one side of the table, but then you also have a section for the things that you’re saving for, your emergency fund, your IRA, your student loan payments, new car fund, and then any other savings that you might want to do.

You can see by the time that you get to the end of your budgeting, you are left with zero dollars at the bottom right of the table. This is essentially the zero-based budgeting system, where all dollars are accounted for.

You can easily do this budgeting system at home but it also means that you have to be super honest with your expenses, and sometimes you might have to do this for three months to get an average of all your variable expenses throughout the three months.

If you’ve read some of my articles before you should know that this budgeting system doesn’t exactly tell you how much you should spend for every single category, rather it kind of helps you understand your expenses as a whole including your fixed expenses, and then you can kind of categorize your expenses and allocate your budget from there.

Factors The Chinese Prioritize

There are four main factors that the Chinese prioritize to help them save a lot of money that I want to tell you about.

1. Don’t Indulge in Luxury Goods

The first of the four main factors that the Chinese do to help them save money is that they don’t indulge in luxury goods or Goods that are just there as status symbols. The majority of Chinese people want to stay humble and they also want to fly under the radar, so they usually stay away from these luxury products.

2. The 10:1 Rule

When the Chinese earn money they usually like to live off a very small percentage of their income. The guy’s father who inspired this article grew up with very little money as a child in Shanghai, there were some days that he could not even afford food and he would go to sleep hungry. When he was able to afford food, all he could buy at the time was a plain pastry called the Mantou.

A Mantou is a tasteless kind of white bun that you can buy for very cheap. Because of this tough childhood when his dad started his career, whenever he earned let’s say $10, he tried to live off of one single dollar.

In reality, was he able to live off of one dollar for every ten dollars that he earned? Not really. There were going to be times that he had to spend six, seven, eight, or nine out of those ten dollars just to make ends meet for him. Though saving money wasn’t a way to build wealth, it was a way to ensure that he never had to sleep hungry again.

So this simple principle of trying to save as much money as you can and live off of little as possible stuck with me as well after I learned it, and it’s one of the main factors that I think many other Chinese people adopt as well.

This is a good rule if you’re trying to build wealth, but please understand that this type of rule will create what’s called a scarcity mindset about money. You kind of have to acknowledge that psychologically that as you earn more money you can kind of switch your mindset into more of an abundance mindset later on.

3. Prioritize NEEDS Over Wants

The third factor that the Chinese employ to save a lot of money is that they focus on their needs versus their wants. Another wise lesson from them is that if you need something and you have to spend money on something you need, then go ahead and spend money especially if it pertains to your health.

If you’re debating between a flimsy desk chair or an ergonomic chair that might be able to make you more comfortable and stay healthier throughout the day, you might want to opt for that ergonomic chair. I would classify the ergonomic chair as a need within reason, of course, you don’t want to take this logic to the most extreme.

For example, everyone needs clothes but that doesn’t mean you need to go buy Gucci clothes just because they are better because it’s a need. The idea is to be reasonable with your spending, make smart choices, and save where you can.

When it comes to wants, you can still buy something that you want but make sure that you’re going to get really good value out of that. What do I mean by that? Let’s say you buy a $350 fancy wallet, like let’s say you just really wanted it. Well, you want to make sure that you can use that wallet for a very long time so that it amortizes the cost of your use.

Could you use that wallet for five years? That means you would take that $350 and spread it out over five years of usage which comes out to less than 20 cents a day. Spending money is inevitable, everybody will have to spend money at some point but the lesson here is to be reasonable and frugal with most of your decisions.

4. Stay IN and Eat at Home

The last factor here is that if you’re trying to save money very quickly, the Chinese would advise you to stay at home and eat at home. I think this one is pretty universal to most cultures, we know that by eating out we’re spending a lot more money on food than we need to.

In my household, I remember growing up and usually having people over to have a group dinner was more of a commonplace, and so that was our way of socializing as a family. going out and the eating out was just mostly saved for special occasions.

I hope some of these tips will inspire you to save, if they did, please let me know in the comments. As the Chinese would say during New Year’s “Gong Xi Fa Cai” which means I hope you get rich. Peace and Happy Hustling!

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