Abstract
This paper explores the saving behavior of the group of low-income households that have participated in the Australian Saver Plus matched savings program. The paper finds that a dynamic panel model represents a good technique for modeling the savings account balances of such participants. We find that, even after controlling for the unobservable individual response to the program incentive, the saving goal and education/financial literacy variables play a positive role in encouraging saving behavior. More importantly however, we find that programs such as Saver Plus are able to modify the saving behavior of individuals to the point where their prior behavior and their inherent attitude towards saving no longer play a significant role.
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Notes
The joint significance of the four summated score variables in the general specification is p = 0.37 and of the sum of those four variables is p = 0.18.
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Acknowledgements
The research in this project was funded by a grant from the Melbourne Centre for Financial Studies. We wish to thank the ANZ Banking Corporation for their funding of the evaluation research that produced the data used in the analysis. Further, we wish to thank the participants in the Saver Plus program for their provision of data. We acknowledge the comments made by Heath Spong, Lucia Dunn and an anonymous referee. The views expressed in this paper are those of the authors and do not necessarily represent the views of the ANZ Banking Corporation or the Melbourne Centre for Financial Studies.
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Appendices
Appendix A
Variable definitions
Variable | Description |
|---|---|
Account balance | Account balance in the Saver Plus account of individual i at time t |
Goal | Specified amount that participant i was aiming to save during the program |
Age | Age in years |
Female (Y/N) | Dummy variable equalling 1 if participant is female and 0 otherwise |
Number of dep. children | Number of dependent children |
Age of youngest child | Age in years of participant’s youngest child |
Single parent (Y/N) | Dummy variable equalling 1 if participant is a single parent and 0 otherwise |
Years of school | Total number of years spent at school (primary and secondary education) |
Completed TAFE/uni course | Dummy variable equalling 1 if participant completed a TAFE (Technical and Further Education—vocational) or a University course |
Responsible for H/hold money management (Y/N) | Dummy variable equalling 1 if participant is responsible for household money management either solely or jointly with their partner and 0 otherwise |
Monthly income | Monthly income in ‘000 AUD |
Income increased during program (Y/N) | Dummy variable equalling 1 if participant’s income increased during program and 0 otherwise |
Income decreased during program (Y/N) | Dummy variable equalling 1 if participant’s income decreased during program and 0 otherwise |
Saved regularly (Y/N) | Dummy variable equalling 1 if participant stated that he/she saved regularly before Saver Plus and 0 otherwise |
Saved sometimes (Y/N) | Dummy variable equalling 1 if participant stated that he/she saved sometimes before Saver Plus and 0 otherwise |
Day to day banking | Summated score associated with knowledge of fees and charges of day-to-day banking |
Convenience banking | Summated score associated with knowledge of fees and charges of convenience banking |
Investment and credit | Summated score associated with knowledge of fees and charges of investment and credit |
Cards (debit, credit and store cards) | Summated score associated with knowledge of fees and charges of cards (debit, credit and store cards) |
Appendix B
Robustness of estimates
Variable | Restricted | Re-estimated |
|---|---|---|
Account balance lagged | 0.8858 (22.3) | 0.8701 (25.7) |
Goal | 0.3311 (2.52) | 0.3210 (2.56) |
Age | ||
Female (Y/N) | ||
Number of dep. children | ||
Age of youngest child | ||
Single parent (Y/N) | −19.235 (−1.88) | −21.234 (−2.11) |
Years of school | ||
Completed TAFE/uni course | 23.329 (2.16) | 24.373 (2.32) |
Responsible for H/hold money management (Y/N) | 49.357 (1.64) | 48.583 (1.69) |
Monthly income | ||
Income increased during program (Y/N) | ||
Income decreased during program (Y/N) | ||
Saved regularly (Y/N) | ||
Saved sometimes (Y/N) | ||
Day to day banking | ||
Convenience Banking | ||
Investment and Credit | ||
Cards (debit, credit and store cards) | 2.2408 (2.32) | 2.3748 (2.41) |
Constant | −268.89 (−1.82) | −254.12 (−1.85) |
Number of observations | 1359 | 1336 |
Number of individuals | 215 | 215 |
Number of observations per individual | ||
Minimum | 1 | 1 |
Average | 6.32 | 6.21 |
Maximum | 16 | 15 |
Hansen test of overidentifying restrictions | 161.1 | 160.1 |
Arellano-Bond test for AR(1) in levels | 1.88 | 1.95 |
Arellano-Bond test for AR(2) in levels | −0.35 | −0.43 |
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Fry, T.R.L., Mihajilo, S., Russell, R. et al. The Factors Influencing Saving in a Matched Savings Program: Goals, Knowledge of Payment Instruments, and Other Behavior. J Fam Econ Iss 29, 234–250 (2008). https://doi.org/10.1007/s10834-008-9106-y
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DOI: https://doi.org/10.1007/s10834-008-9106-y