Saving Patterns and Probability of Success in Individual ...

Saving Patterns and Probability of … 5
difficult to separate the impact of every single aspect of the saving plan on the probability of
success in reaching the minimum IDA savings limit. In other words, even if regularity of
deposits in a given sample of accounts has a meaningful correlation with success in reaching the
savings limit, it is not clear how this relationship will hold, for example, if the plan required a
longer saving period or if a higher maximum savings limit was stipulated.
This article puts forward the simple hypothesis that regular savers, regardless of their
demographic backgrounds, average monthly deposits, and type of deposits (i.e., automatic or
otherwise), stand a better chance of reaching their savings goal. 3 The methodology used here
differs from other studies in that in lieu of explaining Average Monthly Net Deposits (AMND),
it is focusing on completion of minimum required matched total savings. At every given point in
time, there are two groups of participants: those who have completed their total minimum
required savings, and those who have not. The article also discusses inactive savers, an issue that
is not usually addressed separately in studies on this subject. In order to test the main hypothesis
of the article, a binary response model is constructed. And, instead of using the ADD data, a
newer but smaller set of data from 2005 is used. This data set includes 781 IDA accounts from
UWGLA’s micro-enterprise and homeownership IDA programs.
This article is structured in the following way. Section 2 reviews the main features of
UWGLA’s IDA program including enrollments and highlights of the saving plan agreement.
Section 3 analyzes the saving behavior of IDA participants across the United Way’s partner
agencies. The main variables of the model that will be used later in the analysis are introduced in
this section. Section 4 explains the binary response model for saving behavior. The results of the
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