Younger People & Saving Money
While those under 30 years tend to save less than older adults in real dollars, it is important to take into account the stage of life and all they can afford to save and how much they can earn in the future, according to Sherman Hanna, co-author of the study and professor of consumer sciences at Ohio State University.
When such factors are taken into account, about 61 percent of those aged 25 and 58 per cent of 35 year olds are spending less of their income, and therefore savings, “said Hanna.
That compares with about 56 percent of 45 and 55 years of age who would be spending less than you earn.
People “All things being equal, young people are actually more likely to report spending less than their income than are older people,” he said.
“That is surprising given the general advice to young people, and suggests that one need not worry much about their saving habits.”
Hanna led the study with Yoonkyung Yuh, a graduate of Ohio State, who is now associate professor of business at Ewha Womans University in Seoul, Korea.
Their study is published in an upcoming issue of the Journal of Consumer Affairs.
Hanna said he and Yuh looked at the savings in the context of a cycle of “life” model of consumption and saving.
In general, a life cycle model suggests the number of people saved depends on the stage of life the people, and if they are married and have children or are planning, whether they expect to earn more money in the future, and a variety of other factors.
In this model, savings depends not only on current income, current income but the income from the past and expected future income. In this model, young people may save less in this because they expect to earn more in the future.
“There are lots of factors like these that determine whether someone would be saving a lot or a little at a particular time of life,” said Hanna.
The study used data from 17,565 U.S. households that participated in the surveys of Consumer Finances between 1995 and 2004.
The researchers examined the response of respondents to the question of whether the amount of money they spent last year was more or less of their income. If they said they spent less of their income, they appear as the savings for that year.
They then took into account a number of other factors related to savings, including employment status, income, race and ethnicity, education, marital status, health status and number of children, among others.
The results showed that households with a defendant at least 30 years of age had the highest probability of saving, and this probability generally decreased with age.
Single women were significantly less likely to save of households were married the same conditions.
Black households were less likely to save than white households.
Those who reported their health as poor saved more than those who rated their health as excellent, which makes sense if the expected health problems that medical bills are more expensive, “said Hanna.
One advantage of looking at savings in a life cycle model is that researchers can identify which types of households are saving enough, and they are not.
“The results of this study should help better focus the social marketing programs to save, by identifying households that are making savings mistakes,” he said.
For example, the results suggest that we spend less effort to save young people because they are already saving more than middle-aged households.
Marketing programs to push people to save income households should be targeted middle-aged black, single women and those who are less educated, the results suggest.
“We have a much better idea now that we must convince them to save more of their income,” said Hanna.