Savings and ethnic minority households

While existing research suggests that low-income ethnic minority households' patterns of savings have much in common with others on low incomes, it is also clear that there are some distinctive patterns of saving and investment among Britain's ethnic minorities.

This report investigates patterns of saving in Britain's ethnic minority communities, focusing particularly on African Caribbean, Pakistani and Bangladeshi households, as they are known to make least use of formal savings channels. It examines the extent and circumstances under which low-income ethnic minority households save; the purposes for which they save; the mechanisms (both formal and informal) they use to save; which informal channels are either specific to particular ethnic minority groups, or much more common among them; and the potential for developing formal savings products to replace some of the informal channels for saving.

The evidence suggests that:

• on the whole, use of formal savings and investment products is far lower than it is in the white population;
• at the same time, considerable levels of saving are made in informal mutual savings and insurance associations, which have no white British counterpart; investment in property and businesses is more widespread than average; and large sums of money are remitted overseas, some of which is destined for savings or investment;
• in contrast to white British households with a similar level of income, it would seem that far more money is saved or invested to provide long-term income security, especially by Bangladeshis and Pakistanis;
• compared with their parents, second generation migrants are more likely to save for shorter term luxuries, and are also more integrated into British financial services. It seems likely, therefore, that second generation migrants will be far more attracted to new savings products, such as the proposed Individual Savings Accounts, than those who came to Britain as adults.