Working Paper: CEPR ID: DP11033
Authors: Dirk Brounen; Kees Koedijk; Rachel A.J. Pownall
Abstract: Greater personal responsibility towards financial decision-making is being advocated on a global basis. Individuals and households are encouraged to take a more active approach to personal finance. In this paper, we examine behavioral factors, which lead households towards savings and financial planning across a panel of 1,253 Dutch households. In line with the available literature, we find that an individual?s propensity to save decreases with age and is higher among the financial literate. Moreover, we find that saving behavior varies across generations, and is significantly dominant among baby boomers. This generation effect, however, weakens once we account for more individual specifics. Our results offer evidence for parental influence, and for the effects of the psychometrics of numeracy, self-efficacy, locus of control and future orientation. A good understanding of these personality variables helps to explain why some take financial responsibility while others do not.
Keywords: Consumption; Intertemporal household choice; Life cycle models; Saving; Wealth
JEL Codes: D91; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial literacy (G53) | willingness to save (D14) |
| age (J14) | willingness to save (D14) |
| socioeconomic background (I24) | saving behavior (D14) |
| parental influence (J12) | saving behavior (D14) |
| grandparental influence (D15) | saving behavior (D14) |
| locus of control (G41) | saving behavior (D14) |
| economic outlook (E66) | saving behavior (D14) |
| baby boomer generation (J14) | saving behavior (D14) |