DETERMINANTS OF PRECAUTIONARY SAVING MOTIVE

Proceedings of The 2nd International Conference on Applied Research in Management, Economics and Accounting

Year: 2019

DOI:

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DETERMINANTS OF PRECAUTIONARY SAVING MOTIVE

Dr. Shilpa. R. Samant and Dr. P. K. Sudarsan

 

ABSTRACT: 

Household savings play a pivotal role in fostering the rate of economic growth of developing countries. Various saving motives influence household savings. Household saving motives and their components has remained an under researched topic and requires due attention. Saving behavior is subjective in nature and this might be a reason why innumerable studies are done on quantum of household savings and its determinants but there is a paucity of studies relating to saving motives of the individuals. A study of possible determinants of household saving motives and their sub motives can go a long way in better understanding of saving behavior. ‘Saving motives’ are the people’s reasons to save which differ from individual to individual based on various situations they are in. They are broadly classified in to Life-cycle, Precautionary and Bequest Motives. This article proposes to empirically investigate the effect of demographic, social and economic factors on the Precautionary motive which is identified as the most important motive at household level. The study is based on primary data and Ordered probit analysis is used to find out influence of various factors. The study considers four broad components of Precautionary motive for analysis. Demographic factors like age, family size and dependency ratio are identified as the main factors influencing some components of precautionary motive. Savings to help dependents in financial difficulties and to safeguard oneself in case of loss of job or business is influenced by age, whereas family size and dependency ratio determine the saving to face risk of sickness and for one’s old age support respectively. Profession of the individual influences savings for sickness and for unforeseen circumstances like accidents. Similarly, employment status of the individuals is found to influence savings to safeguard oneself in case of loss of job or business.

KeyWords: Precautionary motive, Demographic, Social and Economic factors, Probit analysis.