Immigrant Savings and Charity: Are They Better Than We Are?

Let's face it: we judge. Our bosses judge us and we judge each other (and them). Even our children can tell us who is popular by first grade. So how do we judge immigrants? They are at the bottom of the barrel, right? Who wants to be a poor immigrant, especially an undocumented one? But maybe we are being hasty. What if immigrants are, in fact, better than us in several important ways?

Among the traits we recognize in a good citizen are prudence with money (saving it) as well as generosity with it. Turns out immigrants do better than us in both regards.

The World Bank estimates that immigrants living in the U.S. saved more than $120 billion in 2011 to send home to relatives living in poverty, of which about $25 billion is saved and sent by undocumented immigrants. Called remittances, these payments show not only that immigrants manage their money better than we do, but are also more generous.

New immigrants to the U.S. are typically on a mission to help support their relatives back home. Families send the relative best able to earn and save to America. They deprive themselves of personal comforts and work multiple jobs. They collectively save billions of dollars despite very low pay.

Native-born Americans seldom save. Our savings rate (percent of income saved) is near an all-time low of 4.4 percent. In contrast, immigrants' remittances indicate that their savings rate is close to 11.6 percent.* And this number does not include the money that they save to use in the United States. Saving is a key indicator of healthy finances and one of the key differences between the one percent who save and the rest of us, and apparently between us and immigrants.

Immigrants are not saving to buy a house or a car or a college education for themselves here in America. They are saving to send it back home. This is philanthropy. The $52 billion that 11.6 million Latino households give back (about $4,483 per household) contrasts to the charitable donations of $223 billion given by 117 million U.S. households (about $1,906 per household). Advantage: immigrants.

What makes this all the more impressive is that immigrants make up the majority of the poor in our country on the basis of income. While low incomes and low savings have gone together in the past, these factors diverge for immigrants. It is very revealing that they can generate billions in assets even if they give money away. It presents a real opportunity to help them out of poverty faster; for example, incentives could be provided by matching their savings.

The government already has programs to match savings targeted toward education or home ownership for low-income citizens. But their impact is tiny given heavy bureaucracy and small outlays, so more private foundations need to support the personal savings of low-income families. It is true that the remittance model represents a poor use of funds both because the people who earn it should, in the optimum case, be the ones who spend it, and because immigrant families have real deficits right here in the U.S. that they should address. One example of such a deficit is their children consistently earning the lowest grades. Foundations could offer matches to immigrant savings to target them toward education.

As always, America can learn a lot from immigrants. We should make the lessons easier by respecting what they say and do. It's tough to save and maybe even harder to give it away. It would be great if they kept more of it here for use by their children, but, hey, that's their decision.

* The 11.6 percent figure was calculated as follows: In 2012, Hispanics in the US sent $51,968,250,000 in remittances to Latin America. There are 11.6 million Hispanic households in the US earning $38,624 (median yearly income). The average remittances sent by household is: 51,968,250,000 / 11,600,000 = $4,480. Thus, the ratio of income to remittances is: $4,480 / $38,634 = 11.6%