The Effect of Income Frequencies on Saving Behavior
This paper aims to review empirical evidence on savings activity of consumers within the vast different income disbursement frequencies. Through a survey the focus lies on collecting data on saving habits and the variables that influence it, including income frequency and present-biased. The results align with previously confirmed variables that influence savings behavior; including college completion, age, savings balance, and negatively influenced by level of debt, excluding mortgage(s). The data shows a biased preference towards more frequent income payments because participants assume it stimulates short-term consumption smoothing and improves saving behavior. Evidence from the survey resulted in savings activity that is not significantly different from more frequent income payments. As a result, participants overestimate the benefits of frequent income disbursement and their preferred frequencies do not align with the results. Moreover, present-biased participants did not have a significantly different savings activity though the likelihood of overspending increases. Regardless of the fabricated perception of frequent income deviating from reality, companies and government regulators can make use of this perception to stimulate improved levels of saving and an overall improvement in personal finance.
Faculteit der Managementwetenschappen