Wealth Accumulation and the Propensity to Plan / John Ameriks, Andrew Caplin, John Leahy.

Format:

Book

Author/Creator:

Ameriks, John.

Contributor:

National Bureau of Economic Research.

Caplin, Andrew.

Leahy, John.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8920.

NBER working paper series no. w8920

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2002.

Summary:

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.

Notes:

Print version record

May 2002.