There are a number of challenges Asian Americans and Pacific Islanders (AAPI) face including language barriers, familial obligations, income and education and high cost of living. Given the significant income inequality among the AAPI community, Asian Americans and Pacific Islanders face a range of financial challenges. In order to reduce the wealth gap and work toward equitable wealth and income for all, these key issues need attention and action.
The following are 5 of the biggest financial challenges to the AAPI community along with steps to take to try and overcome each of them.
Taking care of family and relatives
Many study reports say that Asian Americans including those who are born in the United States as well as foreign-born ones financially support a family member. They are also caregivers to at least one other family member such as a spouse, a child, a parent or another relative. This, in fact, is a part of their cultural heritage, to take care of family members and financially provide for them.
For Asian Americans, financial goals involve giving care to family members, buying a home, helping pay for kids’ college education, and leaving behind an inheritance for the next generation. To make these goals a reality would need careful financial planning.
What can be done?
If you’re bearing the burden of having to provide for your family and other relatives, you need to first plan to meet your own needs and then plan for others’ needs. The right financial tools are the need of the hour when caring for multiple family members. For this, look for a financial advisor who can help you plan your finances according to your life goals.
Not the choice for leadership roles
Asian Americans have the name “model minority” due to their inclination toward discipline and hard work. Hence, it is natural that these factors are in conversations about executive and management roles. However, according to a Harvard article, Asian Americans are less likely to be in senior and leadership roles in Silicon Valley. Rather, they have a high chance of getting jobs in technical roles.
Although Asian individuals are highly educated and hold qualified credentials, they are frequently overlooked for executive roles. This corporate barrier is the “bamboo ceiling”. This can be another challenge that contributes to the wealth inequality that’s prevalent among Asian Americans, preventing them from increasing their income. Here’s how these financial challenges can be beaten by the AAPI community.
What can be done?
If you want to overcome the bamboo ceiling, it can take quite a bit of time. Networking with co-workers, your peers, and leaders in the industry can help you make important connections that can help you get into leadership roles. You can also look at joining professional AAPI workgroups if you want to meet others from your community. Making connections with like-minded people in your industry or an industry you want to show interest in is critical to move up the corporate ladder.
Unmet financial needs and student loans
A study done in 2018 revealed that a national average of 75% of students don’t have the necessary financial means to pay for college with their own funds. This is even worse for Asian American students since almost 80% of them have unmet financial needs for higher education. And compared to other racial demographics, AAPI students have the highest dollar requirement for college tuition. The income gap among the Asian American community has a lot to do with these unmet financial needs. The cost of the colleges they choose also is a major factor along with the international students who come from Asia.
What can be done?
The best way to pay for college tuition is through grants and scholarships set aside for Asian American students. Check if you qualify for any of them and apply right away if you do. Another way to pay for college is to start saving money for it while you are still in school. Pick up summer jobs, part-time work, etc. that pays you for the work you do. Every dollar you set aside for your education is worth it. After you get into college, pick up work whenever it is available. This will help you meet some of your financial targets. As a last option, explore if taking an education loan will help. Keep in mind that if you don’t have a proper plan for repayment, you’ll end up repaying the loan for years after college.
Expensive housing rates and low income
Asian Americans who earn well enough will be able to afford to buy a home or two. But for others on the wrong side of the income gap, it is not as straightforward. The median income per Asian American household is higher than the national average household income by almost 40%. But since most of them live in urban cities where the cost of living is high and also because they are normally taking care of their families as well, they may not have enough income left over to pay for a downpayment on a home.
What can be done?
Learn to create and follow budgets. Budgeting is the single most important financial tool that can help you have a better relationship with money. You will know exactly where your money is going so that you can take the necessary steps to cut back on your spending. Budgeting helps you save money consistently so that you can achieve your life goals faster. Also, using a cost of living calculator will help you determine whether you should move to a less expensive city till your finances stabilize.
Money-saving habits and retirement planning
On average, Asian Americans who are born outside the country regularly save money and invest about 47% of the income they earn, according to a 2018 study. Asian Americans born in the United States have higher median incomes and invest 36% of their income for the future. From the study, it is evident that Asian Americans are able to save, invest, and manage their own portfolio far better than other racial demographics. In comparison, the general population invests only 10% of its income for savings and retirement.
The study says that Asian Americans are more systematic in making use of 401(k) plans from employers than the general population and Asian Americans born in the US. The AAPI community can beat these financial challenges.
What can be done?
Saving money is vital to achieving financial independence and freedom. Even if you’re able to save only a little every month, start doing it right away. Build your savings as you go by contributing more and more every month. Set up an emergency fund and keep it separate from your savings and investments. Work towards having 6 to 10 months’ worth of expenses in your emergency account. Make use of the 401(k) plans offered by your employer, especially if they offer matching contributions. This is literally free money that goes towards your retirement. Start financial planning as early as possible. You can achieve your money goals systematically and set yourself up for a comfortable retirement.