What drives savings behaviour? Different psychological traits influence the 'established' and the 'striving' differently.

Research often assumes that the influence of psychological characteristics on savings behaviour is the same across demographic or socio-economic groups. Yet, it is also possible that psychological characteristics influence an individual’s propensity to save differently based on life-cycle stage, gender, education level, or income – factors which themselves also influence savings behavior.

In a paper published earlier this year, we use a technique called a finite mixture model. We apply this approach to a representative sample of UK households (n = 3382) and identify two different groups of people in the UK: 'striving' and 'established' households. We find that the relationship between psychological characteristics and savings behavior differs across these two classes, demonstrating that  different psychological characteristics – such as self-control – will be more or less influential on savings behavior depending on an individual’s environment and life-cycle stage