Financial Responsibility, Personality Traits and Financial Decision ...

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complement with skills and interest, with a set of personality and attitude variables, and finally youth and upbringing. Table 4 presents the results in the form of odds ratios and shows that when only considering demographics and financial background that the perception of being a saver is related mostly to age, income and to a lesser degree to the number of children. Older respondents are slightly less likely to label themselves as savers, whereas higher income households with more children are. But when extending this logit model with additional factors and by moving from model (1) to (5) we find that the explanatory power of the model increases fivefold to 16.88 percent, and that these demographics turn out to be irrelevant once we account for personality and attitude features. Here we find that those with a high financial literacy score are more likely to save for the future. Those who have a leftwing voting tendency are 39% more likely to report themselves as savers. Those who have positive economic expectations are 380% more likely to save. This positive attitude about the future is the most significant variable overall in accounting for reported savings behavior. Those who keep a tight administration are twice as likely to be savers, and those who have a strong internal locus of control are 35% more likely to consider themselves as savers. Table 5— Logit regressions on observed savers To compare these findings on self-reported savers as a proxy for understanding the importance of saving, with those of observed savers our proxy for the usefulness of savings, we repeat the same stepwise Logit regression with a dummy that indicates whether the savings behavior is high or low. At first glance, many of the key results that are displayed in table 5 appear similar to what we found in table 4. Again, when only considering demographics and financial aspects, we find that savings behavior is more common among high-income households with few children. This time, however, 16
these two household demographics remain highly significant for all specifications. Those with children and those with high incomes are able to actually save. Financial literacy is significantly significant and those scoring high on the financial literacy questions are at least 38% more likely to save. The findings remain significant for all these factors, also after extending the model across the table through the various specifications in the table to model (5). This stability of results is also reflected in the R2s that are both high and stable across specifications. Similar to the reported results in table 4 there is a jump in the R2 once including the internal locus of financial control construct and the chance construct. The results remain highly significant that those who take financially responsibility are 40% more likely to save, and those who believe their fate is more left to chance are 26% less likely to save. This finding is perhaps the most compelling factor in this analysis (given the enhanced model fit). The internal locus of financial control and the score on the chance construct are highly significant factors. It is clear that respondents with a strong internal locus of financial control are more inclined to exhibit strong saving behavior. They take matters in their own hands so to say. In the case that the score of the chance construct is high, they believe that faith will determine their financial future and savings behavior is much less likely. All this supports the psychometrical studies that have applied this locus of control construct in other fields. If willpower is strong, actions follow. This is in part down to upbringing. Explaining real savings behavior appears to depend much more on personality, attitude, and upbringing rather than positive economic expectations, where people are prone to be led to believe that they should be saving. Here we find religious respondents and those who keep tight administrations are more likely to save. Further including the various variables for upbringing we find that all age brackets for the various generations 17
Page 1 and 2: Financial Responsibility, Personali
Page 3 and 4: decisions through their understandi
Page 5 and 6: literacy test are 38% more likely t
Page 7 and 8: for their retirement, and thereby r
Page 9 and 10: In total, the survey consists of 62
Page 11 and 12: e good at mathematics, and merely 1
Page 13 and 14: looked at in detail later, and is o
Page 15: striking are the low scores that we
Page 19 and 20: savers, the only interaction effect
Page 21 and 22: References [1] Berman, A. and T. Ha
Page 23 and 24: [19] Modigliani, F., Brumberg,R., 1
Page 25 and 26: Table 1: Summary statistics Total s
Page 27 and 28: Table 3: Robustness test of savings
Page 29 and 30: Table 5: Logit regressions on obser
Page 31 and 32: % Savers 60 50 40 30 20 10 0 Male F
Page 33 and 34: - It is hard to find a good financi
Page 35 and 36: C Financial Literacy Mean Stdev Min
Page 37 and 38: 100% 80% 60% 40% 20% 0% > 1960 1945

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