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Wealth Accumulation And The Propensity To Plan

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  • John Ameriks
  • Andrew Caplin
  • John Leahy

Abstract

Why do similar households end up with very different levels of wealth? We show that differences in the attitudes and skills with which they approach financial planning are a significant factor. We use new and unique survey data to assess these differences and to measure each household's "propensity to plan." We show that those with a higher such propensity spend more time developing financial plans, and that this shift in planning is associated with increased wealth. These findings are consistent with broad psychological evidence concerning the beneficial impacts of planning on goal pursuit. Those with a high propensity to plan may be better able to control their spending, and thereby achieve their goal of wealth accumulation. We find direct evidence supporting this effortful self-control channel in the very strong relationship we uncover between the propensity to plan and budgeting behavior. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Bibliographic Info

Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 118 (2003)
Issue (Month): 3 (August)
Pages: 1007-1047

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Handle: RePEc:tpr:qjecon:v:118:y:2003:i:3:p:1007-1047

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  1. Annamaria Lusardi, 2000. "Explaining Why So Many Households Do Not Save," JCPR Working Papers 203, Northwestern University/University of Chicago Joint Center for Poverty Research.
  2. Brigitte C. Madrian & Dennis F. Shea, 2001. "THE POWER OF SUGGESTION: INERTIA IN 401(k) PARTICIPATION AND SAVINGS BEHAVIOR," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1149-1187, November.
  3. John Ameriks & Andrew Caplin & John Leahy, 2002. "Retirement Consumption: Insights from a Survey," NBER Working Papers 8735, National Bureau of Economic Research, Inc.
  4. B. Douglas Bernheim & Daniel M. Garrett & Dean M. Maki, 1997. "Education and Saving: The Long-Term Effects of High School Financial Curriculum Mandates," Working Papers 97012, Stanford University, Department of Economics.
  5. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
  6. Annamaria Lusardi, 2000. "Explaining Why So Many Households Do Not Save," JCPR Working Papers 150, Northwestern University/University of Chicago Joint Center for Poverty Research.
  7. Alan L. Gustman & Thomas L. Steinmeier, 2001. "Imperfect Knowledge, Retirement and Saving," Working Papers wp012, University of Michigan, Michigan Retirement Research Center.
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