Saving Profiles of Ethnic Minorities: a Life Cycle Analysis

This article investigates savings of ethnic minorities in the UK. We use the life-cycle model and data from the Family Resources Survey to analyse the saving profiles of ethnic minorities by gender and age cohorts. Socio-economic variables are used to better understand saving patterns of ethnic minorities.
We apply the life-cycle model to the different ethnic groups and find significant heterogeneity between and within groups in terms of socio-economic characteristics and saving accumulation during the working life and in retirement. While Indian respondents show saving patterns similar to the white population (our control group), Bangladeshi and Pakistani respondents experience a significant disadvantage in terms of employment and savings.
Gender and ethnicity are important determinants of financial well-being. Bangladeshi women exhibit the greatest financial difficulties amongst all groups examined, often as consequence of low full time employment rates and incomes. For all ethnic groups education is a crucial factor in determining saving behaviour.
The importance of our results lies in determining whether the risk of poverty in retirement is significantly higher for ethnic minority groups and in assessing specific socio-economic and cultural reasons leading many to poverty in later life.