Individual Savings Research Articles

The Importance of Unemployment Risk for Individual Savings

In this paper, we use a novel natural experiment and Norwegian tax data to quantify the causal impact of unemployment risk on individual savings. By comparing individuals who live in the same area but face different increases in risk, we show that a one-percentage-point increase in unemployment rates increases safe assets by 1.3%. Reassuringly, this effect is driven by low-tenured workers, who face the highest increase in risk. Savings in risky financial assets remain unaffected, implying a decrease in the overall risky share of individual portfolios. We use two independent approaches, relying either on cross-sectional variation or time series variation, to quantify the importance of job loss risk in accounting for higher savings during recessions. Our results suggest that unemployment risk can explain 60%–80% of the recession-induced increase in safe assets. This paper was accepted by Camelia Kuhnen, finance. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2023.00987 .

Intergenerational Support and the Financial Strategies of Young Homebuyers in Shanghai

ABSTRACT While homebuying has become central to the economic security and life-course transitions of younger Chinese adult cohorts, affordability has become an increasing obstacle. With individual savings and housing loans fading as means of achieving homeownership, intergenerational transfers have acquired renewed status. This paper addresses the agency of young people and their families in negotiating adverse housing market conditions. It draws on qualitative interviews with young-adults in Shanghai that explore intergenerational transfers and the strategies deployed to finance homebuying and in developing long-term financial arrangements. Our research stresses intergenerational collaboration in how young people navigate owner-occupation as well as how features of families and housing financialization combine to shape the behaviour of young people in the housing market. Shanghai represents a challenging market for young homebuyers, but provides insights on how family-support can shape housing systems and pathways in various housing contexts.

Savings behavior among low-income individuals in Nigeria: a behavioral economics perspective

Low-income individual's savings behavior is of essence in economics and development studies, more so in developing countries like Nigeria. This study considers low-income earners in Nigeria, looking at their savings behavior from the perspective of behavioral economics, with regard to economic incentives, psychological factors, and socio-cultural influences. In this qualitative study, data were collected through in-depth interviews among low-income earners in Nigeria. The data analysis was done using methods to identify major factors that affect savings behavior. The present study finds that low-income people in Nigeria display saving behavior for a variety of factors. It is driven by economic incentives, including access to formal financial services and competitive interest rates. Subject to several psychological factors, such as loss aversion and present bias. Socio-cultural norms influence individual savings efforts through traditional savings practices and community obligations. Moreover, low financial literacy and, accordingly, limited accessibility of financial education are major barriers to effectively saving among this category of people. The findings add to the literature available on household finance and poverty alleviation in Nigeria and other developing countries. It provides valuable insights for policymakers, financial institutions, and development practitioners in creating tailored interventions and financial products that would meet specific needs among low-income earners. The findings of this study unveil the potential of savings to absorb economic shocks, finance productive assets, and increase the level of financial inclusion amongst poor communities meaning that adopting integrated measures—economic, psychological, and socio-cultural—enhances the weak saving habits of low-income earners in Nigeria.

EVALUATION OF KNOWLEDGE AND FACTORS RELATED TO ENTREPRENEURSHIP OF YOUNG PHARMACISTS IN THE MEKONG DELTA IN 2023

Background: The term “Entrepreneurship” refers to innovative, high-risk, and rapidly expanding business ventures that frequently need a substantial cash source. Most of the initial funding comes from individual savings or family’s financial support. The process of becoming an entrepreneur starts with identifying an opportunity and ends with creating a plan to take advantage of it. However, it has never been straightforward or simple to start a firm, particularly in the pharmaceutical sector. In order to initiate and maintain a profitable business, pharmacists must train themselves with business startup expertise. Objectives: To evaluate the knowledge and factors affecting the entrepreneurship of young pharmacists in the Mekong Delta from May 2023 to November 2023. Material and methods: To ascertain the viewpoints of 815 young pharmacists aged from 20 to under 40, this study used a cross-sectional descriptive design and conducted interviews with them, basing on the features of the research item, obtaining knowledge about entrepreneurship and identify some relevant elements. Results: Women made up 69.1% of the young pharmacist workforce, including the majority of college pharmacists (46.5%), university pharmacists (43.1%), and those with master or doctoral degrees (10.4%). 80% were familiar with entrepreneurship, and 90.1% believed that, in order to launch a successful business, entrepreneurs had to have a thorough understanding of the industry in which they planned to operate. 77.8% had high knowledge scores. Regard the total of knowledge scores by characteristics groups, it has been clearly seen in the study that the gender, economic, and educational variables had an impact on general knowledge (p<0.05); in which the college pharmacist category (429.76), along with the rich and the well-off (429.76) had the highest average rankings among the characteristic categories. Conclusions: The majority of young pharmacists in the Mekong Delta were aware of and fairly knowledgeable about entrepreneurship.

Financial Arrangement by Employees in Formal Workplace Environment in Nigeria: Case of Cooperative Societies in Obafemi Awolowo University, Ile-Ife, Nigeria

Individual savings in the current day business world and work place have been channelled on a self-arranged/self-managed platform in the nomenclature of cooperatives irrespective of social class and or income group. Cooperatives have become household name in every organisation: its significance is ringing more than bank name now rings. This research analysed the criteria for being a member in cooperatives as well as the extent of satisfaction that members in the cooperatives perceived they had as a result of their membership subscription. Primary data were collected with the aid of structured questionnaire from 396 respondents who are staff of the Ohafenu Awolowo University, Ile-Ife. Results indicated that there was no constraint to being a member inasmuch as the potential applicant is on the University payroll and such a potential member has not violated the floor of limit of take home pay. Method of monthly contribution into cooperative purse is deduction from source through the bursary department. It was also indicated that monthly contribution is based on a member's capacity in terms of how much a person cares to contribute. Eight major areas of members’ investment horizon were identified as having been promoted by cooperative assistance. Eighteen propositions were raised in terms of members’ belief, identification, and satisfaction with their cooperative, six of such propositions had strong support by respondents. Four variables also indicated significant difference among members when tested on t-test scale. Lastly, nine variables were significant in influencing value added for members. In the overall, members were very satisfied with their cooperatives for saving purposes.

Determinants of Access to Financial Services among Adults in Tanzania: The Evidence from FinScope Tanzania Survey (2017)

There is low financial inclusion across developing countries, especially those in Sub-Saharan Africa (SSA) including Tanzania. Almost three quarter of the SSA citizens don’t hold any form of account with a formal financial institution. East African countries have poor access to financial services especially the highly populated rural areas. The study examined the determinants of access to financial inclusion among adults in Tanzania. The study used a longitudinal research design to access data collected from 9459 respondents who were selected from the FinScope Tanzania 2017 which were weighted by NBS. Data were analyzed using both descriptive and Binary Logistic Model as inferential statistics with aid of STATA version 16. The study was able to find out that individual savings as a key determinant to financial inclusion was relatively low this being due to income gap, education and access to technology. Most of the respondents were willing to save but many-faced constraints to save. finally, the determinants of access to financial services in Tanzania among adults was identified to be age, education level and income. The study concluded that financial inclusion (access to financial services) among adults in Tanzania was mainly determined by age, education and income. Therefore, the effort should be made by the government to stimulate technological adoption so as to enhance variety of service delivery mechanism and provide financial knowledge to the society to inform people to make proper decisions regarding their financial well-being.

The Influence of Financial Literacy on Individual Savings: A Study of University Staff

The intricate relationship between financial literacy and individual savings behavior has garnered considerable attention in personal finance. The study’s objective was to explore the effect of financial literacy, risk tolerance, education level, and work experience on the personal savings of university staff and their degree of relationship. Through a comprehensive survey (N=210), the collected data was subjected to correlational analysis, revealing significant positive correlations between financial literacy and personal savings (r = 0.623, p < 0.01). Further, a regression analysis was conducted, highlighting the predictive role of financial literacy (β = 0.585, p < 0.001), education level (β = 0.126, p < 0.05), and work experience (β = 0.124, p < 0.01) in determining personal savings behavior. These findings underscore the pivotal role of financial literacy in shaping prudent financial decisions and emphasize the potential for tailored educational interventions for enhanced financial well-being.

Improving pension savings investing: The case of Russia

Many countries seek to improve their pension systems by introducing corporate and individual savings plans to address the challenges of demography, social security, and economy. However, the establishing of a long-term, reliable savings system encounters multiple impediments. The retrospective analysis of Russian pension reforms offers some recommendations on solving the typical problems faced by reformers. Thus, in 2002 the Russian pension system was implemented by a mandatory savings pillar, which 20 years later the Ministry of Finance substituted by voluntary savings­. As this period appeared shorter than the average life span, this measure proved ­ineffective in increasing pension payouts for future retirees. The frequent regulatory changes and the shrinking workforce coverage as the state prioritized the welfare of the current pension recipients also infringed upon the interests of future retirees. Pension savings investments were further affected by the economic policy aimed at the minimal return requirements which resulted in a more conservative asset allocation strategy and inefficient active management in non-state pension funds. The study demonstrates that policy actions to overcome these impediments and to raise the replacement rates for future retirees should include (a) steady regulations within a pension savings system of no shorter than 40 years; (b) the savings pillar covering no less than 80% of the workforce; and (c) the asset allocation strategy involving a bigger share of equity, longer time horizon and clear benchmarks. These recommendations can be applied to emerging market economies concerned with improving and reforming their pension systems.

Optimal mix among PAYGO, EET and individual savings

In order to deal with the aging problem, the pension system is actively transformed into the funded scheme. However, the funded scheme does not completely replace PAYGO (Pay as You Go) scheme and there exist heterogeneous mixes among PAYGO, EET (Exempt, Exempt, Taxed) and individual savings in different countries. In this paper, we establish the optimal mix by solving a Nash equilibrium between the pension participants and the government. Given the obligatory PAYGO and EET contribution rates, the participants choose the optimal asset allocation of the individual savings and the consumption policies to achieve the objective. The results extend the ‘Samuelson-Aaron’ criterion to age-dependent preference orderings. Under the baseline model, we identify three critical ages to distinguish the multiple outcomes of preference orderings based on heterogeneous characteristic parameters. The government is fully aware of the optimal feedback of the participants. It chooses the optimal PAYGO and EET contribution rates to maximize the overall utility of the participants weighted by each cohort's population. As such, the negative population growth rate leads to the decline of the PAYGO attractiveness as well as the increase of the older cohorts' weight in the government's decision-making. The optimal mix is the comprehensive result of the two effects.

Digital financial services for health in support of universal health coverage: qualitative programmatic case studies from Kenya and Rwanda

BackgroundThis document describes two qualitative programmatic case studies documenting experiences implementing digital financial services (DFS) for health with a focus on expanding access to universal health coverage (UHC). The CBHI 3MS system in Rwanda and the i-PUSH and Medical Credit Fund programs in Kenya were selected because they represent innovative use of digital financing technologies to support UHC programs at scale.MethodsThese studies were conducted from April-August 2021 as part of a broader digital financial services landscape assessment that used a mixed methods process evaluation to answer three questions: 1) what was the experience implementing the program, 2) how was it perceived to influence health systems performance, and 3) what was the client/beneficiary experience? Qualitative interviews involved a range of engaged stakeholders, including implementers, developers, and clients/users from the examined programs in both countries. Secondary data were used to describe key program trends.ResultsRespondents agreed that DFS contributed to health system performance by making systems more responsive, enabling programs to implement changes to digital services based on new laws or client-proposed features, and improving access to quality data for better management and improved quality of services. Key informants and secondary data confirmed that both implementations likely contributed to increasing health insurance coverage; however, other changes in market dynamics were also likely to influence these changes. Program managers and some beneficiaries praised the utility of digital functions, compared to paper-based systems, and noted their effect on individual savings behavior to contribute to household resilience.Discussion/ConclusionsSeveral implementation considerations emerged as facilitators or barriers to successful implementation of DFS for health, including the importance of multisectoral investments in general ICT infrastructure, the value of leveraging existing community resources (CHWs and mobile money agents) to boost enrollment and help overcome the digital divide, and the significance of developing trust across government and private sector organizations.The studies led to the development of five main recommendations for the design and implementation of health programs incorporating DFS.

Heterogeneous inflation and deflation experiences and savings decisions during German industrialization

Our microeconomic study of the savings behavior of 2,500 German savers in the second half of the 19th century allows us to explore the causes of individual savings decisions in an emerging economy. Inferring savers’ inflation expectations from the personal inflation experiences they made we confirm the standard interpretation of the Euler equation: The savers of our sample reduced their savings with an increase in this proxy for inflation expectation. Beyond this result, our study provides three additional insights. First, we observe a non-linear relationship between inflation experience and savings, implying that savers responded only to exceptionally high inflation (and deflation) experiences ignoring smaller fluctuations in this measure. Second, we find that savers also reacted to high deflation experiences with reducing their savings. This surprising behavior becomes reasonable when we consider that, in the second half of the 19th century, the globalization-driven decline in consumer prices was associated with an increase in nominal wages. Third, we show that it was mainly long-time female savers with above-average savings balances who adjusted their savings to changing inflation experiences.

Gender, family status and health characteristics: Understanding retirement inequalities in the Chilean pension model

This paper aims to measure the impact of life‐cycle events on accumulated retirement savings within the context of a retirement system with mandatory individual savings accounts. Taking into account the impact of lifetime events through multiple channels, the author presents a set of correlated equations that capture labour market behaviour, portfolio and savings decisions, risk preferences, and family and health characteristics, using data from an iconic Chilean experiment. The findings indicate that a woman located in the middle of the wealth distribution who is married with two children, and who suffers a health shock in the last ten years of her working life cycle, accumulates less wealth than her counterpart.

Characteristics, Determinants, Challenges and Performance of Self-employment among the Youth in Uganda

This study examined the characteristics, determinants, challenges and performance of self-employment among the youth in Uganda using the School-to-Work Transition survey data for 2015 collected by the Uganda Bureau of Statistics. We employed two analytical approaches: descriptive statistics and binary and multivariate probit models. We found that most employed youths are self–employed. The majority of the youth were poor and had acquired primary education or less. Econometric estimations indicate that self-employment is determined by age, the number of children, financial status, education, high-income motive and flexible work hours. Most youth started businesses with individual savings or family money but not bank loans. Most youth faced unique problems, but financial constraints followed by market competition were the main challenges faced by the self-employed youth. Self-employment is not lucrative, and 20.29% of self-employed youths do not make profits from their entrepreneurial efforts. Moreover, 78.83% of the self-employed youths live below the poverty line.

Changing the Demand Preference for Electric Vehicles in Ho Chi Minh City: Costs and Benefits From Incentives in the Early Stages of Adoption

This paper evaluates potential costs of implementing financial incentives for electric vehicles (EVs); specifically purchase subsidies and registration rebates offered in HCMC and the benefits related to individual savings and GHG emissions reductions. The analysis indicates that implementation could deliver net-positive benefits during the early stages of EV adoption in HCMC. Overall, the analysis shows that incentives to make EVs more cost-competitive, along with support for the deployment of charging stations, will be crucial for increasing EV adoption in HCMC.

In depth analysis of Fisher model and explore its limitation

This paper shows how people develop the concept of time value of money or the interest rate in the financial market model, how to derive individual savings decisions from corporate investment decisions, and why the net present value rule applies to decision-making. Specifically analyze the relationship between capital market line and Fisher model. And based on the Chinese stock market to further study the Fisher model and show its role.

THE EFFECT OF INDIVIDUAL PENSION SYSTEM ON SAVINGS IN TURKEY: A QUANTILE REGRESSION ANALYSIS

Several problems experienced in social security caused the public sector to introduce some reforms in this area and to put these new regulations into effect. The studies conducted to strengthen the system have increased the importance of individual retirement. Through the effects of the retirement conditions and financial incentives applied, the individual pension system in Turkey is increasingly gaining importance. The Individual Pension System (IPS) plays an important role in eliminating the social security-related problems with the contribution of individuals to their retirement savings and transferring resources to the financial markets by directing these individual savings to investment. In this respect, it is not possible to ignore the economic impacts of the IPS in terms of its functions both for savings and investment. This study aims to examine the relationship between savings and individual pension total assets for quarterly data between 2014 Q1 and 2019 Q4, through Bootstrap Quantile Regression due to the low number of data. As a result of the analysis, it was determined that the variable IPS has a statistically significant decreasing effect of 4.4% on savings.

Heterogeneous effects of health shocks in developed countries: Evidence from Australia

AbstractWe examine how health shocks impact on households' decision to save, and how different socioeconomic and ethnic groups respond to health shocks in Australia. We find that health shocks are associated with a substantial reduction in individual savings. We do not find any substitution of labor supply by a partner in response to an individual's health shocks. We extend previous work by examining whether access to formal health insurance or government benefits mitigate the economic consequences of a health shock. We find evidence that negative health shocks are associated with an increase in receipts of public transfers and benefits in the following years. There is evidence that the fall in savings is greater for low‐income individuals. Individuals who have private health insurance are more affected by health shocks, compared with individuals who do not have private health insurance, suggesting a role for selection into private health insurance.

Editor’s Letter

1. Brett Hammond 1. Co-Editor 2. Anthony Webb 1. Co-Editor One of the principal themes of The Journal of Retirement is how to create and then manage retirement income. As countries around the world increasingly rely on individual savings and investments—sponsored or not—to achieve

The rationality of rainy day savers: objective and subjective determinants of individual savings in Britain

ABSTRACT Using the largest and richest data on savings in Great Britain, six waves of the Wealth and Assets Survey from the Office for National Statistics, we compare standard life cycle models of saving with models using more ‘subjective’ measures, and the added dimension of longitudinal data. Whilst the life cycle model provides a benchmark, regular criticisms remain, particularly people’s propensity to continue saving at older ages. Data on attitudes attenuate that issue, and panel data largely eliminate it. Our results confirm empirically, for Great Britain, the importance of some of the objective determinants of savings included in life cycle theory. When we look at more subjective ones, we show that other factors, including self-rated health and financial pressure, provide an enhanced direct explanation of the propensity to save. Individuals who regard themselves as ‘rainy day savers’ tended to save more, irrespective of their demographic or financial circumstances. Results are robust to different specifications.

Women's groups and COVID-19: An evidence review on savings groups in Africa.

The coronavirus disease 2019 (COVID-19) pandemic and some of the associated policy responses have resulted in significant gendered impacts that may reverse recent progress in gender equality, including in sub-Saharan Africa. This paper presents emerging evidence from studies in diverse contexts in sub-Saharan Africa -with a deep dive into Nigeria and Uganda-on how COVID-19 has affected women's groups, especially savings groups, and how these groups have helped mitigate the gendered effects of the pandemic's and the associated policy responses' consequences up until April 2021.The synthesis presents evidence that savings groups found ways to continue operating, provided leadership opportunities for women during the pandemic, and mitigated some of the negative economic consequences of COVID-19 on individual savings group members. Savings, credit, and group support from other members all likely contributed to the ability of groups to positively affect the resilience of women's group member during COVID-19. Households with a female member in a savings group in Nigeria and Uganda have coped with the crisis better than those not in savings groups. While savings groups have shown the potential for resilience during the pandemic, they often faced financial challenges because of decreased savings, which sometimes resulted in the depletion of group assets. Savings groups also contributed to community responses and provided women a platform for leadership. These findings are consistent with a recent evidence synthesis on how past covariate shocks affected women's groups and their members. We conclude the paper by presenting various policy recommendations to enable savings groups to achieve improvements in women's empowerment and economic outcomes, and research recommendations to address some of the current evidence gaps on how COVID-19 is affecting women's groups and their members.