According to Lincoln Financial Group’s Monthly Consumer Sentiment Tracker, Asian Americans (37%) are most worried about lost income from layoffs and reduced employment hours as a result of COVID-19—a fear that is not unfounded in a population hit especially hard by the economic crisis.
A McKinsey & Co. analysis reported the unemployment rate among Asian Americans jumped more than 450% between February and June 2020, outpacing the rate of other ethnic groups. Almost a quarter of employed Asian Americans work in sectors hit hard by the pandemic like hospitality and leisure, retail or industries like personal care, according to a July 2020 UCLA report that also noted 28% of Asian American small businesses closed between February and April 2020.
Lincoln’s research found that the majority of Asian Americans (82%) are looking for ways to better protect themselves and their families financially, but they are the least likely to be taking any current steps to do so. Whereas other demographics feel now is a good time to purchase financial products and increase investments, one-third of Asian American consumers have taken no financial actions at all in the wake of COVID-19. Even fewer numbers are interested in buying long-term care or life insurance (12%), speaking with an advisor (19%) or increasing their retirement investments (22%). And while most people have shifted financial priorities during the pandemic to better fund emergency savings accounts, Asian Americans did so in much lower numbers (18%).
“Our research emphasized a real discrepancy among this demographic as far as their level of financial engagement, even though they have expressed a desire to tap into financial planning resources and solutions,” said Elena French, senior vice president, Corporate Marketing, Communications and Brand for Lincoln Financial Group. “The socioeconomic landscape is a more complicated one right now for Asian Americans, which likely contributes to their conservative approach. With this study, we wanted to understand how we could better support and connect with Asian American consumers—as well as other racial and ethnic groups—to help them create positive financial outcomes.”
The increased spotlight by Asian Americans on pandemic-related unemployment generates other subsequent financial uncertainties like the ability to cover unexpected medical (63%) and non-medical (62%) expenses, which are underpinned by their lower levels of emergency savings.
An Interest in Financial Guidance
The good news is that while there are financial issues keeping Asian Americans up at night, these consumers are the most likely to say they believe they are doing well planning for their financial future but can still use some help (78%). They are also looking for and open to financial advice (70%), however, Asian American consumers are currently more likely to do their own research, relying on websites (53%) and family/friends/colleagues (43%). They are the least likely to report a preference for speaking with a financial professional (28%).
“Increasing your own financial knowledge is an excellent first step toward feeling more confident and empowered to make important decisions about your financial future,” said Martin Fong, a financial planner at Acord & Fong Wealth Strategies and a registered representative of Lincoln Financial Advisors. “Meeting with a trusted financial professional also plays a key role in that consumers have the opportunity to receive guidance specific to their own unique situation and vision for their financial future.”
For Asian American consumers who are among those concerned about unexpected expenses and the impact of the pandemic on their long-term finances, Fong recommends a few tips to get started on a path to financial wellness:
- Create a financial plan and live within a budget. For those who are not ready to meet with a financial professional, try utilizing online budgeting tools, calculators and other resources to establish a financial outlook. An understanding of your financial wellness helps with long-term goals and financial planning. Then when consumers adopt a personal finance plan and stick to it, they know their basic needs are covered along with other financial priorities. Maintaining a budget is hard without objectives, though. Set a savings goal of a certain amount per month, reducing the likelihood the money will be spent elsewhere.
- Automate wherever possible. Automatic withdrawals from a checking account to a savings account can help those struggling to save. It removes the stress of remembering to do it monthly. Regular savings contributions can go a long way toward building a long-term nest egg, lowering the temptation to use those resources for luxuries and entertainment.
- Create an emergency fund. Fong recommends setting a goal to put three to six months of expenses into a savings account to prepare for any unexpected expenses. An emergency fund provides the peace of mind and safety net needed to help handle a financial crisis. Automatic withdrawals can help set aside the money over time.