The Impact of Family Size on Savings and Consumption Expenditure of Industrial Workers: A Cross-Sectional Study

Tanvi Kiran,Shivam Dhawan

doi:10.3844/ajebasp.2015.177.184

Abstract

The present study investigated and analysed the impact of family size on monthly savings and consumption expenditure of the industrial workers. The results showed that with increasing household size, savings not only dwindled in absolute terms but also in relative terms as witnessed by decreasing saving to income ratios. Conversely, the consumption to income ratios witnessed an increasing pattern, which is indicative of income being diverted away from savings with every addition to the family size. The MANOVA post hoc analyses revealed that the mean monthly savings of each of the higher family size group (more than 3 members) were observed to be significantly lower than the smallest family group (3 members), which is symptomatic of low propensity towards saving in context of the workers with higher family size. Though, the mean monthly consumption expenditure of family size of 4, 5 and 6 members was observed to be significantly higher than that of the largest family group (7 members), however its consumption income ratio was observed to be greater than that of all the lower family size groups. This is logically plausible as the workers having the largest family size were observed to have the lowest mean monthly income, thereby implying the presence of large number of economically inactive members in this group, which resulted in diversion of a large part of their income towards their consumption expenses. The results of the ANOVA regression analysis confirmed that family size has a significant positive impact on the consumption expenditure of the industrial workers. Further, the reduction of savings due to increased burden of the additional family member corroborated the proposed negative effect of family size on savings of the workers.

Highlights

Economic development of any nation is contingent upon the saving potential and consumption pattern of its people
These results are in alignment with the research work of Gonzalez and Ozcan (2008), who reported that with increasing family size, the income is redirected towards the consumption expenses of the additional family member, thereby resulting in significant decline in average savings
The primary objective of the present study was to examine the impact of family size on savings and consumption expenditure of the industrial workers

Summary

Introduction

Economic development of any nation is contingent upon the saving potential and consumption pattern of its people. Of the multiple factors determining the saving and subsequent consumption pattern of the individual, the family or the household size assumes crucial importance (Browning and Lusardi, 1996; Orbeta, 2006). Most of the existing studies are of the view that family size affects both the savings and consumption expenses of the individual, but in opposing direction (Rehman et al, 2010). Because of the presence of relatively large number of economically active members, there is a possibility of average savings of large sized families being more than that of the low member family groups.

Objectives

Results

Discussion

Conclusion