The Origins of Savings Behavior

Abstract:     
Analyzing identical and fraternal twins matched with data on their savings propensities, we find that genetic variation explains about 33 percent of the variation in savings behavior across individuals. Parenting effects on savings behavior are strong for those in their twenties but decay to zero by middle age, i.e., parents do not have a lifelong non-genetic impact on their children's savings. The family environment when growing up and an individual's socioeconomic status later in life moderate genetic effects, so that more supportive environments result in a stronger genetic expression of savings behavior. We also find that savings behavior is genetically correlated with income growth, smoking, and body mass index, suggesting that the genetic component of savings behavior reflects innate time preferences and lack of self-control. In a world moving towards individual retirement savings autonomy, understanding the deeper origins of individuals' savings behavior is becoming increasingly important.

Number of Pages in PDF File: 47

Keywords: Savings, Consumption, Behavioral Genetics

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