Income Uncertainty and Household Saving in the United States

Abstract

The recent economic recession which began in 2007 prompted many individuals and families to reconsider their spending and saving habits. The personal saving rate increased from a very low level prior to the recession to a higher level in 2009 and 2010 ( Bureau of Economic Analysis, 2010 ). At the same time, wealth declined and many families face increased income uncertainty with the loss of unemployment and retirement benefits. The purpose of this research was to explore the relationship between income uncertainty and household saving in the United States. In contrast to many theories of saving, the results indicate that income uncertainty did not significantly affect the likelihood of household saving. Factors that differed significantly in their relationship with household saving between households experiencing and not experiencing income uncertainty were having a high school diploma, having some college, being widowed, low risk tolerance, and having a bequest motive.

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