Savings Decisions Research Articles

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.

Financial Capability and Saving Behavior: Evidence From Industrial Workers in Thailand

This article uses unique survey data to examine the determinants and potential impacts of financial capability on the savings decisions of Thai industrial workers. A random sample of 352 individuals was interviewed, using the questionnaire to gather information on demographics and financial capability. It finds that less than half of the respondents were able to handle an emergency expense of 1 month’s income without borrowing. The results indicate that socioeconomic factors including education level, household income, and age are the key determinants of financial capability. Migrant workers from remote regions of the country are more likely to have a lower financial capability, especially in the financial knowledge component. An instrumental variable approach is used to investigate its potential impact on saving behavior. Overall, the strong and positive association between financial capability and savings adequacy suggests that financial education initiatives should place a strong emphasis on household budgeting and savings.

Designing behavioral prompts to improve saving decisions: Implications for retirement plans

AbstractRetirement plan sponsors, financial advisors, and public policy makers are increasingly interested in encouraging higher levels of retirement savings. This study enhances understanding of the behavioral biases that may adversely impact retirement savings decisions and financial outcomes and suggests mechanisms for improving outcomes. In an incentivized laboratory experiment, we study participants' investment and asset allocation decisions over a meaningful time horizon and test the efficacy of alternative behavioral prompts to motivate investment decisions. We find that greater financial literacy, higher levels of risk tolerance, and lower discount rates significantly increase levels of investment and expected return. Controlling for these factors, we find that behavioral prompts encouraging reflection on goals or on future needs have significant effects on allocation decisions and expected returns for young adults. We also find that the prompts increase expected returns for women and individuals with lower levels of financial literacy. These results suggest that behavioral prompts can be an effective method of improving retirement saving decisions, particularly for the less financially‐literate.

Analisa Keputusan Menabung di Bank Mega Syariah di Kota Medan

The purpose of this study is to determine the impact of religiosity, reference groups, and motivation on saving decisions at the Bank Mega Syariah Iskandar Muda Branch in Medan. The research method employed is quantitative, with an explanatory survey approach. The data is obtained directly from the respondents using a primary data collection technique and a questionnaire was used as the research instrument. The data analysis technique used is multiple linear regression which is processed by using SPSS 24. The sampling method used was accidental sampling with a total of 70 Bank Mega Syariah customers. Based on the results of the analyses, religiosity had partially positive and significant effect on the Saving Decision, the Reference Group had no and insignificant effect partially on the Saving Decision, and Motivation had partially positive and significant effect on the Saving Decision.

ASSESSMENT OF THE RELATIONSHIPS BETWEEN ECONOMIC GROWTH AND SAVINGS

Purpose. The purpose of this study is to develop the evaluation characteristics of the relationship between household savings decisions and macroeconomic growth in order to form a base of identification parameters of effective household financial behavior. Design/methodology/approach. In the article, the authors used the literature review method to justify the importance of implementing the problem of the relationship between savings and economic growth. Based on the trends analysis the authors identified the main features of households’ saving changes during last 17 years, their relationships with changes in GDP, national income and total income of households. The use of correlation-regression analysis made it possible to assess the sensitivity of the impact on the savings of their main elements. Empirical results have been obtained based on official sources of national statistical data and Wold Bank data. Findings. Households play a major role in the economic growth of a nation. Their financial behavior and savings habits can determine the overall economic performance of a country. This paper discusses the elements of household savings, how it affects economic growth, and why it has been on a downtrend lately. It also explores the potential solutions to address this issue and how households can be encouraged to save more for their future. The financial behavior of households in Ukraine has seen significant changes over the past 17 years, and the period of change in priorities between current and deferred consumption is the financial crisis of 2008. Since 2009, seriousness towards savings has been significantly lost. The saving behavior of households in Ukraine is in dissonance with the saving behavior of enterprises and state structures. Households’ savings decisions depend to a small extent on both the absolute size of their income and GDP, as well as their rates of change. Practical implications. The materials presented in the article may be useful for researchers interested in economic growth modeling. Also, the results of this research are of interest to policymakers for creating effective measures of macroeconomic stimulation. Originality/value. In the article, the authors have identified the main regularities of the behavior of households regarding the formation of savings. The changes in the GDP and household income do have not a significant impact on the saving rates both in the short-term and long-term. The changes in the volume of household savings are mainly determined by the dynamics of the volume of net household loans. Households increase indebtedness when the business cycle intensifies (GDP and national income growth). Households in Ukraine are characterized by a high priority of current consumption over deferred (savings).

Optimal Consumption and Savings Decisions with Disastrous Income Risk: Revisiting Rietz's Rare Disaster Risk Hypothesis

Optimal Consumption and Savings Decisions with Disastrous Income Risk: Revisiting Rietz's Rare Disaster Risk Hypothesis

How Income Volatility Influences Saving Decisions: Evidence from the Lab

How Income Volatility Influences Saving Decisions: Evidence from the Lab

Welfare effects of automatic‐IRAs

AbstractSeveral states require employers who do not offer retirement benefits to automatically enroll their employees in individual retirement accounts (IRAs). We quantify the welfare effects of this program for individuals who follow a rule‐of‐thumb to make savings decisions. We find workers who save more than 3% would be willing to give up 0%–1.4% of lifetime consumption to avoid an IRA. We also consider a fully rational model with credit frictions, stochastic income and pre‐retirement withdrawals, and costly IRA opt‐outs. We find that being enrolled in an IRA is most likely to benefit workers who do not borrow during the life‐cycle.

Local rationality

A new behavioral concept, local rationality, is developed within the context of a simple heterogeneous-agent model with incomplete markets. To make savings decisions, agents forecast the shadow price of asset holdings. Absent aggregate uncertainty, locally rational agentsforecast shadow prices rationally, and thereby make optimal state-contingent decisions. They use adaptive learning to extend their forecasts to accommodate aggregate uncertainty. Over time the state evolves to an ergodic distribution near the economy’s restricted perceptions equilibrium. In a partial equilibrium environment we develop intuition for locally rational decision making, documenting an important hysteresis effect. General equilibrium dynamics are examined via a calibration exercise. Calibrated representative-agent RBC models induce low consumption volatility relative to the data. Extending the model by either incorporating adaptive learning or heterogeneous agents fails to alter this conclusion. Via the hysteresis effect, local rationality, which interacts heterogeneity and adaptive learning, significantly improves the model’s fit along this dimension.

Pension Plan Types and Social Security Knowledge: New Survey Evidence

ABSTRACT Knowledge of the Social Security Old-Age and Survivors Insurance program affects people’s work, consumption, and savings decisions before retirement and in turn impacts financial well-being in retirement. This study examines whether the type of employer-sponsored pension is associated with varying levels of Social Security knowledge using data from the Understanding America Study. Results indicate that people with various pension types are consistently more knowledgeable about disability benefits, age adjustment, claiming upon retirement, and spousal benefits, relative to pensionless individuals. Interventions to enhance Social Security knowledge may benefit from targeting the most financially vulnerable individuals, particularly women without a pension, for enhanced retirement security.

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.

Influence Of Financial Literacy on Personal Investment Decisions Among Kenya Football Premier League Players in Kenya

Financial literacy plays an essential role in the process of making financial decisions, as it represents a systematic effort aimed at the development of positive knowledge, and attitude. Extant literature indicates that the financial literacy among football players is low which ultimately affects their investment decisions. Therefore, the purpose of this study was to determine the influence of financial literacy on personal investment decisions among KPL players in Nairobi. The study was guided by the following specific objectives; to determine the influence of savings decisions, financial knowledge and skills, financial awareness and financial attitude on personal investment decisions among KPL players in Nairobi. The study adopted dual process theory, the exchange theory and the goal setting theory. The study employed a descriptive research design. The target population was 396 football players from the 18 teams playing the KPL for the season 2020/2021. The study covered a period of one year from November 2020 to August 2021. This study used a sample of 30% from each of the 18 KPL teams. Therefore, from each of the 18 teams, 7 football players were randomly selected making up a sample size of 126 football players. A self-administered structured questionnaire was given to the respondents for data collection. Quantitative data collected was analyzed using descriptive and inferential statistics. Statistical Package for Social Sciences (SPSS V. 23.0) was used for data analysis. Regression model was used to establish the relationship between the study variables. Before conducting the regression analysis, diagnostic tests was conducted. These tests included the multicollinearity and normality tests. The findings were presented in form of tables and figures. The findings were of importance to the football teams in Kenya as it emphasized on the need for financial literacy training. The study established that savings decisions, financial knowledge and skills, financial awareness and financial attitudes had a positive and significant influence on personal investment decisions among Kenya football premier league players in Kenya. The study concluded that the most important reason why one should start planning at an early stage of making saving decision is the power of compounding, which allows you to earn extra money on the interest received from investments. Being financially knowledgeable and skilled allows an individual to be better prepared for specific financial roadblocks, which, in turn, decreases the chances of personal economic distress. Financial awareness enables players to gain the ability to use knowledge and skills to effectively manage financial resources efficiently at a personal-level and through the lifecycle. In this era of dynamic financial markets and turbulent economic environment it is very important for every individual to keep a positive mindset towards his/her finances. A positive financial attitude helps an individual strike a right balance between the utilization of money and other aspects of life, not become overly conservative and achieve long-term financial goals. The study recommended that an individual should make a financial plan by making his or her own list and then think about which goals are the most important to him or her. The players should be encouraged to subscribe to financial newsletters. The players needs a basic understanding of financial concepts to make good financial decisions. every individual needs to keep a positive outlook about personal finances and the key to this is to develop financial skills in consultation with an expert like a certified financial planner (CFP) professional, who is equipped to take one on the path to attain freedom from financial worries.

Long-term care needs and savings in retirement

In this paper, I investigate to what extent heterogeneity in both long-term care (LTC) needs and informal care support affects the savings decisions of the old. For this purpose, I develop and estimate a model of retired single individuals where agents are exposed to physical and/or cognitive health deterioration that triggers demand for LTC. To cope with LTC, agents differ in the amount of informal care provided by relatives and can purchase formal care at a market price to supplement this. I find that (i) LTC is relatively more important than bequest motives in explaining the lack of dissaving of individuals with limited access to informal care, (ii) concurrent cognitive and physical limitations account for most of the precautionary savings related to LTC, and (iii) Abstracting from informal care provision from relatives overestimates the welfare gains from expansions in government-provided means-tested care programs.

Antecedents of Savings Behaviour Among Rural Households: A Holistic Approach

The main purpose of this research is to empirically examine the antecedents of household savings behaviour in the Metekele, Beneshangu Guzu state of Ethiopia. In this study, three broader factors (household characteristics, socio-economic variables and institutional variables) influencing savings decisions of households have been identified and examined. This study followed mixed method research design with questionnaire and in-depth interviews as the main instruments. Binary logistic regression has been mainly utilized to analyse the quantitative data. The findings revealed age, educational level, family size, number of livestock unit, income, irrigation utilization, production season, participation in non-farm activities, use of credit, training and education significantly impact savings behaviour. However, sex, religion, marital status, land ownership and expenditure were found insignificant contributors to the model. The government and concerned parties should support more for the decision to save by facilitating and undertaking training on saving options, conducting regular review and monitoring to develop a clear policy on the importance of savings specifically for households on habit of regular savings.

High Marginal Tax Rates on the Top 1 Percent? Lessons from a Life-Cycle Model with Idiosyncratic Income Risk

This paper argues that high marginal labor income tax rates on top earners are an effective tool for social insurance even when households have high labor supply elasticity, households make dynamic savings decisions, and policies have general equilibrium effects. We construct a large-scale overlapping generations model with uninsurable labor productivity risk, show that it has a realistic wealth distribution, and numerically characterize the optimal top marginal rate. We find that marginal tax rates for top 1 percent earners of 79 percent are optimal as long as the model earnings and wealth distributions display a degree of concentration as observed in US data. (JEL D15, D31, H21, H24, H55, J22, J31)

The Saving Behavior of Heterogeneous Households and Credit Constraints: A Decomposition

This paper sheds light on how saving decisions respond to credit constraints. In this paper, we examine the role credit constraints play in the savings decisions of households by focusing on a well-defined set of reasons for their savings. To do so, we classify the saving motives as precautionary saving, saving to finance investments, and saving for retirement. We find that credit-constrained households are less likely to save for retirement and liquidity, while they are more likely to save for investment purposes. Constrained Black households are more likely to save for in- vestment purposes. Discouraged households are more likely to save for investment and less likely to save for retirement purposes. When households are credit-constrained, they use their savings to smooth their consumption rather than to accumulate wealth over time.

Correction to: Household Savings Decisions in Israel’s Child Savings Program: The Role of Demographic, Financial, and Intrinsic Factors

Correction to: Household Savings Decisions in Israel’s Child Savings Program: The Role of Demographic, Financial, and Intrinsic Factors

Mediating Effect of Impulsive Buying on the Relationship between Financial Behavior, Materialism, and Savings Decision of Generation Z

This study examines the mediating effect of impulsive buying on the relationship between financial behavior, materialism, and savings decision of Generation Z. Data were gathered from 452 members of the Gen-Z cohort who at the time of data collection, were actively enrolled in Osun State-owned tertiary institutions. Data analysis was performed with the aid of a structural equation model. The study establishes that financial behavior (FB) has a positive and significant link to savings decisions (SD) but has no significant effect on impulsive buying. It was also confirmed that materialism (ML) has an inverse relationship with savings but has a positive and significant influence on impulsiveness. The study also reveals that impulsive buying has no significant influence on savings decisions. In addition, it was affirmed that impulsive buying did not mediate between financial behavior, materialism, and savings decision. Consequently, the study recommends that education regulatory authorities should persuade all tertiary institutions in the country to integrate financial education as a compulsory part of the school curriculum at all levels. This will go a long way to improve Gen-Z’s financial wellbeing such as purchase decisions, spending self-control, cash management, savings and investment, rational decision-making and solvency, and self-predictions. Keywords: Financial Behavior: Impulsive Buying: Materialism: Savings: Gen-Z

Consumption and Savings Decisions: Teaching The Precautionary Motive In Intermediary Macroeconomics Courses

Consumption and Savings Decisions: Teaching The Precautionary Motive In Intermediary Macroeconomics Courses

Are the saving decision patterns of bank customers also clouded by psychological biases? Evidence from Ghana

PurposeThis paper attempts to investigate the influence of psychological biases on saving decision-making of bank customers in Ghana.Design/methodology/approachIt employs weighted least squares regression to test the effect of psychological biases on savings decisions of bank customers.FindingsThe findings show that all the nine psychological biases, namely mental accounting, availability, loss aversion, representativeness, anchoring, overconfidence, status quo, framing effect and disposition effect employed for the study have a significant influence on saving decision of bank customers. The results depict that psychological biases are entrenched in the saving pattern of bank customers in Ghana.Practical implicationsFor policy purposes, the study recommends that bank customers need to enhance their knowledge of psychological biases in order to improve their gains from savings, and not to fall prey to these prejudices. The satisfied customer is a dependable source of bank viability and survival.Originality/valueTo the best of the knowledge of the author, this study provides the first empirical evidence of the influence of psychological biases on saving decisions of bank customers in Ghana. The findings of this study will enhance knowledge on the influence of psychological biases on individual decision-making and will accentuate the fact that the individual is not an entirely rational being.