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Are Young People Becoming More Risk Averse? An Analysis of Factors Contributing to the Rise in Precautionary Savings Among Young Adults

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Abstract

Since the late 1980s, young people aged 18–34 have increasingly stated that their primary reason for increasing their saving rate has been to protect themselves against uncertain future times. The rate of increase in “precautionary” savings exceeds that of all other age groups, and has occurred against a backdrop of declining real income, a tepid economic recovery from the Great Recession of 2008–09, a tightened credit environment, and changing household demographics. This study considers the impact of these and other elements on young adults’ decisions to save for precautionary purposes, and considers what possible impacts these developments might have for broader consumption and production trends in the U.S economy.

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Notes

  1. Although there are approximately 5000 families interviewed for the SCF during any given survey year, there are actually 25,000–30,000 observations contained within the SCF survey database. For many purposes, one must consider the sampling error of SCF estimates. Because detailed information on the sample design cannot be released and because of the complexity of the SCF design, users cannot apply some of the standard procedures for variance estimation. A set of sample replicates, five per observation, has been created with bootstrap techniques, and analysis weights have been computed independently for each replicate. All estimates provided in this analysis are based on weighted samples using the replicate weights provided in the triennial SCF data releases.

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Authors and Affiliations

  1. Harvard University, Cambridge, MA, USA

    LaVaughn M. Henry

  2. Rockhurst University, Kansas, MO, USA

    LaVaughn M. Henry

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  1. LaVaughn M. Henry
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Correspondence to LaVaughn M. Henry.

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Henry, L.M. Are Young People Becoming More Risk Averse? An Analysis of Factors Contributing to the Rise in Precautionary Savings Among Young Adults. Bus Econ 52, 32–40 (2017). https://doi.org/10.1057/s11369-017-0020-x

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  • DOI: https://doi.org/10.1057/s11369-017-0020-x

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