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Saving and Asset-Accumulation Strategies Used by Low-Income Individuals

Author

Listed:
  • Amanda Moore

    (Washington University in St. Louis)

  • Sondra Beverly

    (Washington University in St. Louis)

  • Michael Sherraden

    (Washington University in St. Louis)

  • Margaret Sherraden

    (University of Missouri-St. Louis)

  • Lissa Johnson

    (Washington University in St. Louis)

  • Mark Schreiner

    (Washington University in St. Louis)

Abstract

This paper presents quantitative and qualitative data regarding the saving and asset-accumulation strategies used by low-income participants in Individual Development Account programs (IDAs). The results of a cross-sectional survey with 298 IDA participants and case studies with 15 IDA participants—the first methods that assessed saving behavior among this population—demonstrate that low-income individuals use psychological and behavioral strategies to save, deposit, and maintain assets. The most frequently used strategies are behavioral saving strategies for increasing the efficiency of spending (e.g., shopping more carefully for food) and for reducing consumption (e.g., spending less on leisure). Qualitative results indicate that individuals also use goals and mental accounting to help them save, view their deposits as bills or pay their accounts first to help them make deposits, and create "rules-of-thumb" to maintain assets. Linear regression results suggest that the behavioral saving strategies are not predictors of savings amounts in IDAs. Additional research is needed to understand the saving process among low-income individuals.

Suggested Citation

  • Amanda Moore & Sondra Beverly & Michael Sherraden & Margaret Sherraden & Lissa Johnson & Mark Schreiner, 2001. "Saving and Asset-Accumulation Strategies Used by Low-Income Individuals," GE, Growth, Math methods 0108001, University Library of Munich, Germany, revised 27 Dec 2001.
    • Handle: RePEc:wpa:wuwpge:0108001
    Note: Type of Document - Acrobat 3.0; prepared on Windows 98; to print on Adobe Acrobat 3.0; pages: 31 ; figures: included in paper file
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    References listed on IDEAS

    as
    1. Thaler, Richard H, 1990. "Saving, Fungibility, and Mental Accounts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 193-205, Winter.
    2. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April.
    3. Shefrin, Hersh M & Thaler, Richard H, 1988. "The Behavioral Life-Cycle Hypothesis," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 609-643, October.
    4. Maital, Shlomo & Maital, Sharone L., 1994. "Is the future what it used to be? A behavioral theory of the decline of saving in the west," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 23(1-2), pages 1-32.
    5. Sondra Beverly & Amanda Moore & Mark Schreiner, 2001. "A Framework of Asset-Accumulation Stages and Strategies," Development and Comp Systems 0109004, University Library of Munich, Germany.
    6. Beverly, Sondra G. & Sherraden, Michael, 1999. "Institutional determinants of saving: implications for low-income households and public policy," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 28(4), pages 457-473.
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    Cited by:

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    2. Maury Gittleman & Edward N. Wolff, 2004. "Racial Differences in Patterns of Wealth Accumulation," Journal of Human Resources, University of Wisconsin Press, vol. 39(1).
    3. Laajaj, Rachid, 2017. "Endogenous time horizon and behavioral poverty trap: Theory and evidence from Mozambique," Journal of Development Economics, Elsevier, vol. 127(C), pages 187-208.
    4. Preecha Swasdpeera & I.M. Pandey, 2012. "Determinants of personal saving: a study of salaried individuals in Thailand," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 3(1), pages 34-68.

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    More about this item

    Keywords

    savings; poverty; asset accumulation; Individual Development Accounts;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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