Expectations and the Saving Behaviour of Children: Analysis of the U.S. Panel Study of Income Dynamics

Sarah Brown and Karl Taylor

Abstract

In this paper, we analyse the saving behaviour of a sample of children drawn from the 2002 and 2007 Child Development Supplements of the U.S. Panel Study of Income Dynamics. In particular, we focus on the influence of children’s expectations and attitudes towards the future on the total level of children’s savings as well as on savings specifically for future education and savings for other purposes. Overall, our findings suggest that the saving behaviour of children, as measured by the level of savings, appears to be influenced by their expectations, especially expectations regarding future educational attainment and life expectancy. Specifically, the level of savings held by children is monotonically increasing in the expected level of educational attainment and children who are pessimistic about their future life expectancy are found to hold lower levels of savings, which is consistent with discounting future consumption heavily.