Wealth Accumulation and the Propensity to Plan

35 Pages Posted: 3 May 2002 Last revised: 21 May 2002

See all articles by John Ameriks

John Ameriks

The Vanguard Group, Inc.

Andrew Caplin

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

John V. Leahy

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: May 2002

Abstract

Why do similar households end up with very different levels of wealth? We show that differences in the attitudes and skills with which they approach financial planning are a significant factor. We use new and unique survey data to assess these differences and to measure each household's 'propensity to plan.' We show that those with a higher such propensity spend more time developing financial plans, and that this shift in planning effort is associated with increased wealth. The propensity to plan is uncorrelated with survey measures of the discount factor and the bequest motive, raising a question as to why it is associated with wealth accumulation. Part of the answer lies in the very strong relationship we uncover between the propensity to plan and how carefully households monitor their spending. It appears that this detailed monitoring activity helps households to save more and to accumulate more wealth.

Suggested Citation

Ameriks, John and Caplin, Andrew and Leahy, John V., Wealth Accumulation and the Propensity to Plan (May 2002). NBER Working Paper No. w8920. Available at SSRN: https://ssrn.com/abstract=310467

John Ameriks

The Vanguard Group, Inc. ( email )

P.O. Box 2600
MS V36
Valley Forge, PA 19482-2600
United States
610-503-5676 (Phone)

Andrew Caplin (Contact Author)

New York University (NYU) - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-8950 (Phone)
212-995-3932 (Fax)

HOME PAGE: http://www.econ.nyu.edu/user/caplina/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John V. Leahy

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States
212-992-9770 (Phone)
212-995-4186 (Fax)

HOME PAGE: http://www.nyu.edu/fas/Faculty/LeahyJohn.html

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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