UNDERSTANDING THE SAVINGS PATTERNS OF LOWER-INCOME INDIVIDUALS.

Abstract

Through two fieldworks conducted in Singapore, we examined factors that influence an individual’s level of savings. The first fieldwork with 1,900 respondents uncovers differences in the savings attitude, financial knowledge, degree of impatience and risk preference between lower income and middle to higher-income individuals. We find that a better savings attitude, financial knowledge and patience is associated with a higher level of savings in the CPF Retirement Account. Another fieldwork was conducted with 180 lower-income individuals to understand their monthly saving habits and preference in CPF policies. Through a series of questions, we measured an individual’s financial strain, financial self-efficacy and financial knowledge. Our results show that financial self-efficacy and the presence of a savings aim affect savings positively. In contrast, high financial strain prohibit savings, and financial knowledge has no influence on the level of savings. These findings yield insights into possible institutional interventions to increase savings among lower-income individuals.