Skip to main content

Hierarchical Financial Needs Reflected by Household Financial Asset Shares

Abstract

This study explores the relationship between family financial needs and household financial asset shares. A conceptual framework based on the needs hierarchy theory, new consumer demand theory, and prospect theory guides the investigation. Results from the bivariate and tobit analyses suggest that family financial needs are hierarchical that are reflected by patterns of financial asset shares. Specifically, checking and savings accounts represent the lowest-level survival needs, and bonds and stocks represent the highest-level growth needs. The rest of the financial assets examined, except for trusts, represent the middle-level security needs.

This is a preview of subscription content, access via your institution.

References

  1. Alderfer, C. P. (1972). Existence, relatedness, and growth: Human needs in organizational settings. New York: Free Press.

    Google Scholar 

  2. Alderfer, C. P. (1989). Theories reflecting my personal experience and life development. Journal of Applied Behavioral Science, 25, 351–365.

    Google Scholar 

  3. Ando, A., & Modigliani, F. (1963). The “life cycle” hypothesis of saving: Aggregate implications and tests. American Economic Review, 53, 55–84.

    Google Scholar 

  4. Barro, R. J. (1974). Are government bonds net wealth? Journal of Political Economy, 82, 1095–1117.

    Google Scholar 

  5. Bryant, W. K. (1986). Assets and debts in a consumer portfolio. Journal of Consumer Affairs, 20, 19–35.

    Google Scholar 

  6. Bryant, W. K. (1990). The economic organization of the household. New York: Cambridge University Press.

    Google Scholar 

  7. Chang, Y. R., Hanna, S., & Lindamood, S. (1993, October). Factors related to non-housing asset accumulation. Paper presented at the meeting of the Academy of Financial Service, Toronto, Canada.

  8. Claycamp, H. J. (1963). The composition of consumer savings portfolios. Urbana: University of Illinois, Bureau of Economic and Business Research.

    Google Scholar 

  9. Davis, E. P., & Schumm, W. R. (1987). Savings behavior and satisfaction with savings: A comparison of low-and high-income groups. Home Economics Research Journal, 15, 247–256.

    Google Scholar 

  10. Friedman, M. (1957). A theory of the consumption function. Princeton: Princeton University Press.

    Google Scholar 

  11. Friedman, M., & Savage, L. J. (1948). The utility analysis of choices involving risk. Journal of Political Economy, 56, 279–304.

    Google Scholar 

  12. Garman, E. T., & Forgue, R. E. (1997). Personal finance (5th ed.). Boston: Houghton Mifflin.

    Google Scholar 

  13. Georgescu-Roegen, N. (1966). Analytical economics: Issues and problems. Cambridge: Harvard University Press.

    Google Scholar 

  14. Gitman, L. J., & Joehnk, M. D. (1996). Personal financial planning (7th ed.). Fort Worth: Dryden.

    Google Scholar 

  15. Gordon, J. R. (1987). A diagnostic approach to organizational behavior (2d ed.). Boston: Allyn and Bacon.

    Google Scholar 

  16. Hanna, S., Chang, Y. R., Fan, X, J., & Bae, M. K. (1993). Emergency fund levels of households: Is household behavior rational? In T. Mauldin (ed.), The Proceedings of the 39th Annual Conference of the American Council on Consumer Interests, (pp. 215–222), Columbia, MO: American Council on Consumer Interests.

    Google Scholar 

  17. Hefferan, C. (1982). Determinants and patterns of family saving. Home Economics Research Journal, 11, 47–55.

    Google Scholar 

  18. Hey, J. D. (1979). Uncertainty in microeconomics. New York: New York University Press.

    Google Scholar 

  19. Johnson, D. & Widdows, R. (1985). Emergency fund levels of households. In K. Schnittgrund (ed.), Proceedings of the 31th Annual Conference of the American Council on Consumer Interest (pp. 235–241). Columbia, MO: American Council on Consumer Interests.

    Google Scholar 

  20. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47, 263–291.

    Google Scholar 

  21. Kennickell, A. B. (1991). Imputation of the 1989 survey of consumer finances: Stochastic relaxation and multiple imputation. Paper presented in the Annual Meeting of American Statistical Association, Atlanta.

  22. Kennickell, A. B. (1992). 1989 survey of consumer finances: Codebook. Washington, DC: Board of Governors of the Federal Reserve System.

    Google Scholar 

  23. Kennickell, A. B., & Starr-McCluer, M. (1994, October). Changes in family finances from 1989 to 1992: Evidence from the Survey of Consumer Finances. Federal Reserve Bulletin, 80, 861–882.

    Google Scholar 

  24. Kotlikoff, L. J. (1989). What determines savings? Cambridge: MIT Press.

    Google Scholar 

  25. Kurz, M. (1985). Heterogeneity in savings behavior: A comment. In K. J. Arrow and S. Honkapohja (eds.), Frontiers of economics (pp. 307–327). Oxford: Basil Blackwell.

    Google Scholar 

  26. Lancaster, K. J. (1966). A new approach to consumer theory. Journal of Political Economy, 74, 132–157.

    Google Scholar 

  27. Lancaster, K. J. (1991). Modern consumer theory. Worcester: Billing & Sons.

    Google Scholar 

  28. Maddala, G. S. (1983). Limited-dependent and qualitative variables in econometrics. Cambridge: Cambridge University Press.

    Google Scholar 

  29. Maslow, A. H. (1954). Motivation and personality. New York: Harper and Brothers.

    Google Scholar 

  30. Maslow, A. H. (1955). Deficiency motivation and growth motivation. In M. R. Jones (ed.), Nebraska symposium on motivation, Vol. 3. (pp. 1–30). Lincoln: University of Nebraska Press.

    Google Scholar 

  31. McDonald, J. F., & Moffitt, R. A. (1980). The uses of tobit analysis. Review of Economics and Statistics, 62, 318–321.

    Google Scholar 

  32. Menger, J. E. (1981). Principles of economics. New York: New York University Press. (Original work publlished 1871)

    Google Scholar 

  33. Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function: An interpretation of cross-section data. In K. Kurihara (ed.), Post Keynesian economics (pp. 388–436). New Brunswick: Rutgers University Press.

    Google Scholar 

  34. Paroush, J. (1965). The order of acquisition of consumer durables. Econometrica, 33, 225–235.

    Google Scholar 

  35. Poduska, B. (1992). Money, marriage, and Maslow's hierarchy of needs. American Behavioral Scientist, 35, 756–770.

    Google Scholar 

  36. Shefrin, H. M., & Thaler, R. H. (1988). The behavioral life-cycle hypothesis. Economic Inquiry, 26, 609–643.

    Google Scholar 

  37. Tang, T. L. (1992). The meaning of money revisited. Journal of Organizational Behavior, 13, 197–202.

    Google Scholar 

  38. Tobin, J. (1958). Estimation of relationships for limited dependent variables. Econometrica, 26, 24–36.

    Google Scholar 

  39. Weagley, R. O., & Gannon, C. F. (1991). Investor portfolio allocation. Financial Counseling and Planning, 2, 131–154.

    Google Scholar 

  40. Williams, F., Lown, J., Haldeman, V., Garman, T., Fletcher, C. N., & Cramer, S. (1990). Financial concerns of employees and their productivity. In R. O. Weagley (ed.), Proceedings of 1990 annual meetings of Association for Financial Counseling and Planning Education (pp. 45–68). Columbia, MD: AFCPE.

    Google Scholar 

  41. Winger, B. J., & Frasca, R. R. (1997). Personal finance: An integrated planning approach. Columbus: Charles E. Merrill.

    Google Scholar 

  42. Xiao, J. J. (1995). Patterns of household financial asset ownership. Financial Counseling and Planning, 6, 99–106.

    Google Scholar 

  43. Xiao, J. J., & Noring, F. (1994). Perceived saving motives and hierarchical financial needs. Financial Counseling and Planning, 5, 25–44.

    Google Scholar 

  44. Xiao, J. J., & Olson, G. I. (1993). Mental accounting and saving behavior. Home Economics Research Journal, 22, 92–109.

    Google Scholar 

  45. Zick, C. D., & Gerner, J. L. (1987). Family composition and investment in household capital: Contrasts in the behavior of the husband-wife and female-headed households. Journal of Consumer Affairs, 21, 21–39.

    Google Scholar 

Download references

Author information

Affiliations

Authors

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Xiao, J.J., Anderson, J.G. Hierarchical Financial Needs Reflected by Household Financial Asset Shares. Journal of Family and Economic Issues 18, 333–355 (1997). https://doi.org/10.1023/A:1024991304216

Download citation

  • family finance
  • household asset portfolios
  • household financial assets
  • Maslow's theory
  • saving behavior