NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Disentangling the Importance of the Precautionary Saving Mode

Arthur Kennickell, Annamaria Lusardi

NBER Working Paper No. 10888
Issued in November 2004
NBER Program(s):   AG   EFG

We assess the importance of the precautionary saving motive by relying on a direct question about precautionary wealth from the 1995 and 1998 waves of the Survey of Consumer Finances. In this survey, a new question has been designed to elicit the amount of desired precautionary wealth. This allows us to bound the amount of precautionary accumulation and to overcome many of the problems of previous works on this topic. We find that a precautionary saving motive exists and affects virtually every type of household. Even though this motive does not give rise to large amounts of wealth for young and middle-age households, it is particularly important for two groups: older households and business owners. Overall, we provide strong evidence that we need to take the precautionary saving motive into account when modeling saving behavior.

download in pdf format
   (372 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

This paper is available as PDF (372 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w10888

Users who downloaded this paper also downloaded these:
Lusardi, Schneider, and Tufano w17072 Financially Fragile Households: Evidence and Implications
Gourinchas and Parker w8107 The Empirical Importance of Precautionary Saving
Carroll and Kimball w8496 Liquidity Constraints and Precautionary Saving
Hurst, Kennickell, Lusardi, and Torralba w11731 Precautionary Savings and the Importance of Business Owners
Chakrabati, Lee, van der Klaauw, and Zafar w16999 Household Debt and Saving During the 2007 Recession
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us