In this blog, I’m going to reveal the Chinese secret to saving money.
There are four main factors that the Chinese prioritize to help them save a lot of money.
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.
One of my Chinese friend told me his story: that he grew up with very little money as a child in Shanghai. There were some days that he could not even afford food, and he would go to sleep hungry.
When he was able to afford food, all he could really buy at the time was a plain pastry called the Mantou. Mantou is a tasteless kind of white bun that you can buy for very cheap because of this tough childhood.
When he started earning money, let’s say if he earn ten dollars, he tried to live off of one single dollar only.
Now, in reality, was he able to live off of one dollar for every ten dollars that he earned? Not really.
There were going to be times that he had to spend six, seven, eight, or nine out of those ten dollars just to make ends meet for him.
Though saving money wasn’t a way to build wealth, it was actually a way to ensure that he never had to sleep hungry again.
So, this simple principle of trying to save as much money as you can and live off of as little as possible really stuck with me, and it is 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 a scarcity mindset about money, and so you kind of have to acknowledge that psychologically, as you earn more money, you can switch your mindset into more of an abundance mindset later on.
3.Prioritize needs over wants.
The Chinese way of saving a lot of money is that they really focus on their needs versus their wants.
So another wise lesson from them is that if you need something and you have to actually spend money on something you need, then go ahead and spend money, especially if it pertains to your health.
Example 1: If you’re debating between a simple 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.
Example 2: Everyone needs clothes, but that doesn’t mean you need to go buy Gucci clothes just because they are better because it’s a need. So here, the idea is to be reasonable with your spending, 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 it.
I mean, let’s say you buy a $350 fancy wallet and you just really wanted this. Well, you want to make sure that you can use that wallet for a very long time so that it repays the cost of your use. If you could use that wallet for five years, then that means you would take that 350 dollars 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 & 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 we would go out to eat once every other week.
Usually, having people over to have a group dinner was more common, and so that was our way of socializing as a family growing up, and the eating out was just mostly saved for special occasions.
I hope some of these tips will inspire you to save; if they did, please let me know in the comments.
I’ve gotten some money-saving tips from my Chinese friend, who’s your typical good with money, and I want to share those with you today.
The most stunning fact about the Chinese is that in China, the gross savings rate is 45.9% as of December 2021, which means that for every $100 that they bring in, they’re going to be saving roughly $46.
When we compare it with the United States, where we have a heavy focus on consumption in this country our savings rate is typically between 3.5 – 5%, according to the data.
So, why are the Chinese so good at saving money? First, it’s definitely cultural, and as Americans, we’re always being hit with sales, discounts, and account financing options, and we’re always kind of pressured to keep up with our neighbours.
This began 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 increase the economy.
In China, it’s very different. They have a heavy emphasis on saving money because of what money means to them as well as the demographics of their country.
You’ll also find a heavy aversion to financing things in China. Oftentimes, Chinese people want to buy things full in cash instead of trying to finance it and take on debt.
The first reason why Chinese people like to save money is the meaning of money and what it means to them.
So as kids, you’re taught from a very early age that saving money is honourable. 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.
Demographics :-
Until 2016, China actually had a one-child policy that was implemented in the late 70s and early 80s to control overpopulation, which meant each family could have one child.
So now, if you had more than one child, you would just be slapped with a fine, and 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 or other services like education.
So, 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 a lot of people kind of used contraception to avoid female births and try to optimise for male births, and with that contraception, it actually twisted the population, having more males than females over time, so at its worst, there were 122 males for every 100 females that were born.
In general terms, if you have more men than women, you have a supply and demand issue.
So basically, to stand out as a man in China, you have to be viewed as successful, i.e., you probably have a lot of money.
The other thing with the one-child policy was that since families were only having one child, they weren’t having multiple kids.
Another reason for saving in China is that there’s no 401K, no IRA (individual retirement account), there’s no retirement accounts that Chinese people can contribute to; rather, they have what’s called a pension system.
Still, many people in China are wary that the pension system will still be around when they retire, and so they also worry about the cost of healthcare education and their own pensions.
So why Chinese people are brilliant at saving money? It’s not anything crazy; it’s just that they have every dollar accounted for.
In my particular case, my friend would always know where his money is going at all times, and there is a special budgeting system that can help you with this.
In America and in Western countries, it’s called the “zero-based budgeting system.” It is a method in which you budget where you spend every last cent of your monthly income so that your amount left at the end of every month is equal to zero.
So that means your income-expenses = 0 at the end of the month. Now, expenses in this case also include savings, investments, paying off debt, etc.
A zero-based budgeting system is one where all dollars are accounted for.
You can easily do this budgeting system at home, but it also means that you have to be super honest with your own expenses.
The 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.
