The Influence of Saving Objectives on Saving: First Response Versus Any Response for Objectives

Abstract

Why do we save? Do saving decisions reflect personal needs to achieve goals in one’s life? This study examined the influence of six saving goals constructed both from Life-cycle hypothesis, and Maslow’s hierarchical theory of human needs. Even though traditional goals, such as retirement savings and precautionary savings, have been at the center of the academic debate on saving (Siegmann, 2002), empirical studies indicate that households can save for one or more reasons at the same time beyond the frequently analyzed goals (Wärneryd, 1995). We tested both the first response goal (Model1) and the combined first through sixth response goals (Model2), while controlling for other household characteristics, expectations, and attitudes. The 1998-2007 Survey of Consumer Finances datasets were used for the analysis. The traditional goal, the retirement/security goal from the life cycle hypothesis, was the most commonly found goal, but the self-growth goal from Maslow’s theory was the least. However, in the multivariate analyses on both Model1 and Model2, the self-growth saving goal was the most influential goal leading households to save more than any other goals.

Keywords: saving, saving objective, saving goal, goal setting, Survey of Consumer Finances, Maslow hierarchy, first choice, combined choice

JEL Classification: D03, D12, D14, D91