How the Wisdom of Confucius Can Lead You to Financial Success

A 2012 Pew Research Center Report, "The Rise of Asian Americans," identified Asian Americans as "the highest-income, best-educated and fastest-growing racial group in the United States." In addition, according to the report, Asian Americans are more satisfied than the general public with their lives, finances, and the direction of the country, and they place more value than other Americans do on marriage, parenthood, hard work and career success.

YuKong Zhao (pictured), an expert in China business and strategic development at Siemens, believes the secret to the success of Asian Americans can be found in the enduring messages of Confucius.

Zhao, who grew up in a Confucianism-influenced family in China, moved to the U.S. in 1992. His bicultural experience and deep understanding of Confucianism has led him to conclude that Americans can learn from Confucian values to improve their lives in a variety of ways.

Most noteworthy in the differences between Asians and non-Asian Americans is their outlook on life. "Americans have a short-term view of life and Asians have a long-term view," says Zhao. "This impacts everything about their lives, but is particularly important when it comes to money management."

Confucian Money Management Tips

Zhao's book, "The Chinese Secrets for Success: Five Inspiring Confucian Values, published in April, offers practical guidance for money management as well as other topics. In it he focuses on five Confucian values:

1. Determination for leading an outstanding life.
2. Pursuing an excellent education.
3. Thrift; saving for a better life.
4. Caring for your family.
5. Developing desirable friendships.

"All these values contributed to the resurgence of the Japanese economy after World War II and have helped develop the economic strength in Korea, Taiwan, Singapore, and Hong Kong along with China. On a more individual basis, these values have helped Asian Americans become a 'model minority' in the U.S.," Zhao says.

The thrift value, in particular, contains key lessons on managing money conservatively and wisely.
While the money tenets below are emphasized in many cultures and countries, they have been especially embraced in Asian cultures. Looking at them through the Confucian lens, Zhao offers an interesting way to frame one's approach to financial well-being.

Avoid debt. Zhao says Confucian values de-emphasize short-term gratification in favor of investment for your future and your family's future.

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"Chinese people take the long view of money, so even working-class people save money so that they have it later to invest," says Zhao. "Asians hang on to their cash and live within their means rather than taking on debt."

Zhao recalls reading a study that showed that 40 percent of Americans live beyond their means, with credit cards being a tool that enables them to do so. "A lot of Americans work just to pay the interest on their debt, but Asians follow the philosophy that it's better not to have any credit card debt. They pay for their cars with cash. About the only debt most Asians will take on is a long-term, 30-year mortgage with a low interest rate."

Save for the future. "A big part of the lunar Chinese New Year celebration every year is to have a fish dish which represents having a surplus all year," says Zhao. "It's a big reminder that every year you need to save money for the future."

Zhao says Asian American families focus intensely on saving for their children's education and for their own retirement. "In China, the savings rate across all income levels is 25 percent, but in the U.S., people save less than 5 percent of their income," says Zhao. Even working-class Asian American families sometimes pay cash for homes. They are able to do so because they have been consistently saving for their family's future needs, he says.

Be thrifty and spend wisely. "When I first came to the U.S., I lived in a basement and bought the cheapest food I could find so I could save money for my family to come here," he says. "It's very common for many Asian Americans to live frugally in order to save money."

Not only does the Confucian philosophy say you should save money, but it also emphasizes being wise about spending. Price isn't the only consideration: Quality figures prominently in the purchasing decision. Zhao says that's the reason, for example, you see many Asian Americans driving high-quality cars. It's not that they're drawn to buying a status symbol, he says; it's because they want to buy a reliable car that will last for the long term.

Teach your children about money. Studies show that American students consistently rank behind students in Singapore, Korea, Hong Kong, Taiwan and Japan in math skills. That's because Asian American families tend to place a lot of emphasis on following good money management traditions and avoiding American consumerism. It's a Confucian value to pass on knowledge from one generation to the next, says Zhao.

There is also an emphasis on learning math skills: "Students who aren't taught math don't know how to manage their money, either," he says. "They have no knowledge of the consequences of their money mistakes."

Think differently about your finances

"My goal with this book is to introduce Confucian values to a mainstream audience," says Zhao. "I think these values have helped Asian Americans weather the financial crisis better than other groups, so I want to share them with other Americans."

Saving consistently, avoiding debt, spending wisely and investing for the future are practices that have good results no matter where in the world they are followed.