The Spending and Saving Habits of Junior High School Students in

The University Of Mindanao Tagum Campus

A Thesis Submitted for the Partial Fulfilment of

Project in English 3s

Researchers

KC Franceska Blando

Kaye Monique Geli

Jessa Mae Itanong

Lovely Mae Ranises

Desiree Jane Romanillos

October 2016
 Chapter 1

INTRODUCTION

Background of the study

The habit of savings plays an important role in everyday financial decisions

and independence of an individual. Research conducted by the Psychology Today

has shown that there are indeed a positive relationship between savings and growth.

Higher savings has proven to be an integral component to personal growth of an

individual.

However, due to numerous needs and wants of individual specifically junior

high school students, saving has become somehow impossible. They’re easily got

tempted with things and bought it immediately without minding the cost. As a result

of this, teenagers are having a hard time spending their money wisely.

Since teenager’s today have more money to spend than previous

generations, teens attitude towards money has changed. For instance, teenagers

from the past save money for future purposes but teenagers today spend money just

for short term personal needs and often engaged in impulse consumptions. Although

teenagers still saves, we cannot deny the fact that most of them spend more than

saving.

Internationally, according to a report from Packaged Facts in 2014, there are

approximately 25.6 million teens in the U.S. market and the amount of money they

spend every year continues to grow. They spend mainly for clothing, food,

entertainment, personal-appearance products and transportation yet they can still

manage to save. They have part-time jobs and summer jobs that serve as their

source of income. Teenagers in United States save for long-term purposes like
college and life after college. But teenagers by nature also want to save for their

personal needs that are why they also have separate savings for it where they save

in a bottle or jar.

In the Philippines, Filipino children are generally not clueless about budgeting

and saving. They tend to obey what their parents tell them to do, save half of their

allowances, and spend the rest. But for Filipino children, saving just means to buy

wants, such as gadgets, shoes, bags and clothes rather than a way to grow and

multiply money or for future purposes. Since they are likely to be more dependent to

parents and tend to separate only by the time after married, they save just for short

term run. According to a survey there is ample room for Filipino children to improve

their money management skills. It’s just that their mentality towards money along

with the environmental factors that influence them to spend prevents them to save

and improve.

In locality, since Tagum City is now urbanized, various businesses and

establishments already rooted, developed and still continue to grow within the city’s

vicinity. In the view of the fact that residents of Tagum are mostly composed of

people who are living in a middle life status or considered to be in a middle class,

surely they can afford to buy and spend money for it. . The businesses such as food

cafés, convenience stores, restaurants, bars and establishments such as malls,

cinema, arcades and internet cafes, are the reasons why teens spends more and

saves less. Liked most of the Filipinos, Tagumeños also spend their money primarily

for foods and personal wants like gadgets, accessories, cosmetics and etc. But then

again, despite of being spendthrift of us Tagumeños we still do not abandon the

thoughts of saving. Teenagers still do saving although the money that they saved is

just good for short term and doesn’t involve any thoughts regarding future matters.
 Chapter 2

REVIEW OF RELATED LITERATURE

According to Literature of Economy association, students who are able to

manage their finances are more likely to organize their lives and manage their time

in a way conducive to good academic progress. A person's ability to manage their

money is essential to being successful. Managing money is about budgeting money

expenditures and allotting money for savings. It means that a person who does

budgets money well and practicing saving are people who are more likely to

succeed.

A study conducted by Dell Amore in 2001, in analysing some of the factors

which influence individuals saving differs between instinctive and congenital savers.

For instinctive savers, the dominating influence to save is that of the person’s innate

characteristics. For instance, in time of wealth or abundance in money, instinctive

savers will save more. However, for people who are deeply rooted in congenital

factors or labelled as congenital savers, the volume of savings does not change

even when the possibilities of saving diminish especially in times of financial

insufficiency.

The manner in which individual specifically Junior High school students

manage their money based on several factors such as gender, age, personality traits

or attitudes towards money, knowledge and family stability.

Gender seems to have a natural difference in terms of approach to saving and

spending. Since males and females are raised differently by their parents, according

to Gottschalck, 2008 and U.S. Bureau of the Census, 2007, gender roles may affect

the saving and spending behaviours of male and female teenagers. Results showed
that female and male students did not have different saving behaviour, although

females had a more positive attitude towards saving and shopping than males. In

addition, females were more concerned about being rich or having a lot of money

than males, while males had a more positive attitude towards spending money than

females.

Age is also a factor that contributes to the spending and saving habits of

individuals. In the study conducted by Quartey and Blankson in 2008, age suggest

that individuals save more as heads become older. According to the lifecycle theory

model, individual consumption will be high and savings low during the early working

life. However, as income increases, the amount of money set aside for savings will

increase reaching a peak during the most productive work years. In addition to,

Deaton and Paxson, researchers in The University of Tennessee Extension

organized a study in 2004, and found out that while savings rates vary with the

demographic of age, this variance is small resulting in only slight influences on

savings. They concluded that although saving patterns can be interpreted in terms of

age, the effects are not always plausible and are frequently suggestive to other, non-

lifecycle explanations such as income and other external influence.

The five psychological factor model of personality traits or called as BIG-5

personality traits presented by McCrae and Costa in 2010 in their article research

has been validated to serve as the foundations for the application of personality in

terms of acting or influencing one’s saving and spending habits. This model has

been mapped onto five dimensions where each dimension contains six facets that

shape each dimension.

 Table 1: Description of the BIG-5 personality traits

Big 5 Facets

Conscientiousness Self-Efficacy, Orderliness, Dutifulness Achievement-

Striving, Self-Discipline, Cautiousness

Openness: Imagination, Artistic Interest, Emotionality,

Adventurousness, Intellect, Liberalism

Extraversion: Friendliness, Gregariousness, Assertiveness Activity

Level, Excitement-Seeking, Cheerfulness

Agreeableness: Trust, Morality, Altruism, Cooperation Modesty,

Sympathy
Neuroticism/ Anxiety, Anger, Depression, Self-Consciousness

Emotional Stability: Immoderation, Vulnerability

McCrae and Costa generally distinguish two types of traits; Extraversion and

Agreeableness as the inter-individual behaviour, meaning that these traits describe

how an individual interacts with other. On the other hand, Conscientiousness,

Neuroticism, and Openness to Experience deal with the intra-individual habitude of a

person. The most influential factor that certainly contributes to spending and saving

habits is the Extraversion. This trait, along with the 4 remaining traits had

characterized how an individual deals with intellectual and emotional tasks specially

on handling money.

Saving results from particular decisions about the relative value of present

and future goods and one’s perspective regarding future goods may be affected by

the amount of education possessed. Since the more educated should expect

relatively steeply rising earnings streams, the prospect of increasing comforts might

lead them to value future goods less and hence to save less for any level of current

income. On the other hand, since the more educated may be better able to realize

the worth of future goods, they may save more.

Family stability

There are various popular books for parents and young people, dispensing

advice about saving and spending (Rendon and Kranz, 1992). Davis and Taylor

1979 recommended that children as young as 12 and 13 years old should be

encouraged to save for a relatively inexpensive item that may purchased in a matter

of weeks. They argue that children should be thought to save for emergencies, to

make the best use of opportunities, and to acquire the concept of interest. Saving,

they argue, also offers and opportunity to learn about investments and shares, as

well as the rules attached to borrowing money. Godfrey (1993) recommends that

even pre-schoolers store their money in jars, piggy banks, with quite specific

purposes or the money.

Chapter 3

RESEARCH METHODOLOGY

The study focused on what do Junior High School students of the University of

Mindanao Tagum Campus spending and saving habits are and what influences them

to spend and how they manage money.

This study used qualitative research technique in gathering informations and

was conducted using face-to-face interview. The group was divided into each 4 pairs

and was intrusted to interview different grade levels. Respondents are chosen

according to their will and availability to participate. We designed the questionnaires

focusing to know the different ways on how students spend and save and anything

related to their money.

We started this research by conducting a preliminary research and gathering

initial references from books found in library and pdf files searched in the internet
about researches that can be associated to our topic. We also search about the

current state of out chosen topic which is the saving and spending habits of

teeanagers not just in Philippines but also in other country to have some background

knowledge and base perspective.

After conducting the research, we proceed immediately in deciding what

research instrument will fit for our study and the respondent’s time availability. We

constructed the research questionnaires by identifying the main purpose of the study

and formulating the possible outcomes and resulting informations gathered from the

interview and set objectives in line with the research purpose.

Data’s gathered during the interview has been recorded or written right away

by the interviewer to prevent disremembering. Results has been studied, analyzed

and interpreted by the researchers forming conclusions and recommendations for it.

________________________________________________

Data analysis

The study set out to investigate seven main questions following from the objectives.

For all the questions with the exception of question three, the study employed

statistical tools such as descriptive statistics, frequency and cross tabs to examine

any relationships that exist between them. Difference in means (T-test) was

statistically used to determine the extent to which the mean income and savings

between two

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variables under consideration was significant. Chi-square test were also employed to

ascertain whether or not some associations existed between some of the variables.

Motives for saving and uses of savings were ranked

Conclusion

As indicated in the district profile, Ga-East was created not long ago and it has been

confronted with diverse challenges in the health, education, sanitation and waste

management sectors. Though the district has been putting in much effort to

minimize, if not remedy these challenges, the lack of funds to undertake projects and

initiatives aimed at remedying the problems is a great obstacle.

In events where residents in the districts saves some portion of their income,

payment of property rates and other taxes that the assembly collects from the people

will not be a challenge to the people. This will enable the district generate and

accumulate enough funds to undertake diverse and many developmental projects

relating to sanitation and waste management, health, education, roads networks

among other infrastructural developments. This will speed the growth of the district.

However, when the savings attitude of the people are poor, the ability to pay the

property rates and other taxes and charges by the assembly becomes difficult and

this in effect hinders the growth of the distri

This chapter presents the analysis and discussions of the findings from the GLSS 5

data and also interviews conducted in some selected communities in the Ga-East

municipality. The main focus of the study is to examine the factors that determine the

level of savings of households and also assess their motives and uses of saving

4.1 Data Presentation and Analysis

 a. Pre-test

b. Post test

c. Control

d. Reach

e. Endurance

Chapter 5

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

Introduction

The study sought to investigate the determinants of household savings habit, motive

and uses of savings in Ghana in 2006, using the Ghana Living Standard Survey

(GLSS) 5 data. The approach used for analysis involved the use of descriptive, logit

and OLS regression analysis to ascertain how savings has been influenced by

various factors. Another survey was conducted at Ga-East municipality where 200

household heads were interviewed to obtain data to assess the effect of future

expectation of income on the level of savings and the motives and uses of savings

5.1 Summary of Findings

5.1 Summary of findings

5.1.1 Savings account and Average savings

The data showed that the proportion of household members with savings account

increased in 2005/6 than in 1991/2 and 1996/7. The findings from the descriptive

statistics show that male held more savings than females and also had higher men

savings than them. The number of people with savings account and average savings
increased with higher levels of education. Akans held mores savings account and

the northerners held the least but for average savings, Ewes had the highest

savings. Urban residents held more savings account and had higher savings than

rural dwellers. Those living in rented apartments had higher savings account and

average savings than those living in rent-free apartments. Workers in the health and

education

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sector held more savings account and those in the agricultural sector held the lease.

But those in the mining and financial, real estate, insurance and business services

had the highest average savings whiles those working in restaurants, hotels and

food sellers had the least savings. Those employed in the formal sector held the

highest savings account and had the highest savings. Finally those registered under

the NHIS held the highest savings than those who are not registered.

5.1.2 Savings and age

The findings show that those below 18 years held more savings account than the

working class and the aged. However, the aged (60 years and above) had higher

savings balance than the children and the working age. This was contrary to the life

cycle hypothesis. The logistics regression analysis showed that the maximum age

limit where people held much savings account was 36 years and the highest savings

was recoded at 31 years. Beyond these age limits, the proportion with savings

account and the average savings declined.

Assessing the effect of employment on savings showed that considering only

income, the proportion with the highest savings account was recorded at 29 years for

informal sector workers but age was not significant for formal sector workers. For the

mean savings balance, the maximum savings was recorded at 49 years for those in

the formal sector and 42 years for those in the informal sector. Thus those in the

formal sector are able to save much of their income within a longer lifespan than

those in the informal sector. At the individual and household level, age was not a

significant determinants of the possibility of people to hold savings account. But for

average savings. It was a good predictor for only those in the formal sector but not

those in the

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informal sector. At the individual level the highest savings was recorded at 43 years

and 44 years at the household level for those in the formal sector. Thus there is no

significant difference at savings with the lifespan at both the individual and

household level

Also an analysis of the effect of locality on savings also showed that age is a good

predictor for those in the rural areas in determining the possibility to hold savings

account but is not a good predictor for urban residents. For instance, considering

only income and age (holding all other factors constant), the maximum age at which

people held the highest savings account was 40 years and 37 years at both the

individual and household levels. For the level of savings, considering only income,

the age at which savings was at its peak was 60 years for urban residents and 40

years for rural residents. But at the individual and household levels, savings was only

a significant predictor for urban residents and not rural residents. The maximum

savings was recorded at 38 years at the individual level and 40 years at the

household level. Thus at the household level, urban residents are able to save for a

longer lifespan than at the individual level

5.1.3 General determinants of savings

The findings from the study show that various innate and policy driven factors

determine the possibility of an individual to hold a savings account and the amount

he saves. The study showed that for the possibility to hold savings account, income

is a good predictor. As people’s income increases, they open savings account or

participate in susu. Those living in urban areas held more savings account than rural

residents. NHIS clients held more savings account that non-clients and those living

in

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rented apartments held more saving account than those living in rent-free

apartments. Females also held more savings account than males. The proportion of

savings account increased with higher educational levels. The study however found

that marital status, sector of employment and household size do not have any effect

on the possibility to hold a savings account.

Form the analysis of the levels of savings, the data also showed a positive

relationship between income, urban residents, formal employment, NHIS registered,

education and married couples and mean savings. However there was a negative

relationship between the average savings of those living in rent-free apartments as

compared to those living in their own home. Thus those living in rent-free houses

saved less as compared to those living in their own homes. Household size also had

a negative relationship with savings.

5.1.4 Savings and expectation of future changes in income

People will expect that in an ideal situation, those who expect income to fall in the

future will save more today so that they can smooth their consumption in the future.

This has been the position of many scholars among which are Lusardi (1998) and

Guariglia (2001). However, these notions do not hold for all people given the fact

situations prevailing in two places are not the same. There exist social, economic

and cultural difference between people living in different geographical areas,

especially the advanced and developing countries.

The results of the data collected from the field also showed that those who expect a

future increment in their salaries saved higher than those who do not expect or do

not

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know of any future changes in income. This is because, those with future expectation

in income are the most educated and working in the formal sector. Therefore they

get higher incomes and also access to information about future changes in prices

and incomes. Majority of the people (90.5%) were not certain about future changes

in their incomes. Those who did not expect their incomes to increase over time even

had lower savings compared to those who expected their incomes to increase over

time.

5.1.5 Motives and uses of savings

Savings is not only driven by income but also by individual expectation and

motivation. People are therefore expected to channel their savings to satisfy their

motives for saving. However, there were variations in the motives for savings and the

uses of savings. People had planned motives for savings which included acquiring

household asset, unexpected expenditures, children future education, purchase

business asset, retirement among many others. The results from the study showed

that after saving, the planned motives are not satisfied but priorities are given to

unplanned motives. For instance, majority of savings are channelled to unplanned

medical expenses, unplanned funeral or marriage functions before the planned

educational expenses, investment and household asset acquisition which formed the

primary basis for the savings. Thus unplanned expenditures tend to take come first

in the use of savings than the planned expenditures.

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5.2 Conclusion

This research recognized the fact that the determinants of the savings habit of

households are versatile and are influenced by demographic and economic factors

based largely on income. The findings showed that the main predictors of the

probability of an individual to have savings account were income, locality, NHIS

registration, place of accommodation, sex, age and education. For age it was clear

that the level of savings at the various age levels do not conform to the life cycle

hypothesis as the aged had higher savings than the working class. On the other

hand, the main determinants of the level of savings were similar to the determinants

of the possibility of saving namely income, locality, sector of employment, NHIS

registration, age, education, household size and marital status.

From the determinants of savings above, it is clear that aside the innate factors

which drive savings, there are other policy driven factors which influence the level of

savings. Some of these factors are income, employment, education and NHIS.

Acknowledging the fact that mobilizing domestic savings is a primal to the attainment

of a sustained economic growth and development, initiatives directed at these

determinants will impact positively on the economic and financial life of the

Ghanaians as it will ensure the effective management of money.

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5.3 Recommendation

Based on the findings and conclusion that were drawn from both the GLSS 5 data

and the data collected from the Ga-East municipality on expectations, motives and

uses of savings, the study recommends the following. First and foremost, a limitation

to the study was the inability to explore the ways or forms of savings. It is an

undeniable fact that many of the rich have diversified their savings from just saving it

with financial institutions to putting them into assets (e.g. acquisition of landed

properties) partly because of the unstable nature of the Ghanaian market. This study

only focused on the amount of savings as reported by the people in the GLSS 5 and

did not include assets. The ability of future studies to value assets and capture it in

the savings will give detail understanding of household savings behaviour. It will be

interesting to add a qualitative approach to gain more in-depth understanding for

household savings habit than using only quantitative approach. Attention could also

be focused to ascertain reasons to the variation in savings with respect to age and

locality.

Also, it was found that in many instances (if not all), the average expenditures were

higher than the average incomes. Thus, people consumed more than they earned

and this is quite interesting. This might partly be as a result of the fear of

depreciation and inflation which reduces the real value of income. The study

proposes that future studies will investigate much deeper into finding reasons that

have accounted for this. Also the government can pursue policies that will increase

the income base of the people and help them cut down their expenses to induce

savings. Thus policies that will encourage savings and reduce consumption.

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People had little knowledge about future changes in the income perhaps due to the

lack of information flow. Future studies can equally shift attention to assessing the

reasons that accounted for the lack of knowledge about future changes in the

income. Even though it might partly be explained that in our part of the world, people

hardly give accurate information about their income and also the economic and

market systems revolve around uncertainty of price changes, an in-depth study will

be of great value addition. It will still be prudent to be able to establish the facts

around this since it might help people to make better savings decisions.

The educational system should be strengthened as education has proven to have a

positive relationship on savings. The study acknowledges that the country at the

moment is on course implementing the free compulsory basic education (FCUBE) as

it is enshrined in the constitution. However, higher savings were recorded at higher

educational levels (secondary and beyond). Therefore, the government should make

initiative and budgetary allocation to subsidize the educational cost at these levels to

make it more affordable. This is because, developing the human resource base of a

country is developing the drivers of development of the country.

Unplanned medical expenses took the bulk of people savings. This is partly because

until 2005/6 when the data was collected, only 14.88% of the population had

registered with the NHIS and as many as 85.12% had not registered. The picture

might be different today but this still calls for the attention of the government to

intensify the sensitization and education of the public especially those in the rural

areas to encourage them to enrol on the NHIS since it will help them use their

savings for other intended or unintended purposes.

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a. Research Questions and answers

5.2 Conclusions

5.3 Recommendations

The fact that such a large proportion of respondents were public school teachers

likely meant that the convenience sample characteristics differed somewhat from the

general population. First, the fact that the sample had relatively high job security and

good insurance protection likely meant that individuals negatively affected by

unemployment were under-sampled, and that the negative effects of high medical

cost may have been mitigated by insurance. The number of teachers included in the

sample likely also limited variability of certain sample characteristics. On the other

hand, the greater homogeneity of the sample might have constrained the effect of

income, which was not measured or controlled in the analysis. While the data

generally supports the theory of lifecycle savings, this study found that the degree of

dependency between age and length of savings time is not equal across all of the

age groups. The data confirms that respondents tended to delay savings while

young and attempt to “catch up” immediately prior to retirement. This raises the

question as to what role other life stage factors may play in influencing length of

savings time. The data reveals particularly pronounced differences in the savings

patterns among young adults, those approaching retirement, and those retired. The

effects predicted by life cycle theory appear to be more pronounced early in

adulthood and in pre-retirement. In other words, young adults appear to be saving

less than life cycle theory may predict, while those immediately pre-retirement are

saving more than predicted by lifecycle theory. While researchers have proposed

savings among age groups follows a smooth humped-shaped distribution peaking

around age 57, the data from this study indicates the shape of the distribution is

skewed right, initially flatter through middle age, peaking sharply prior to retirement
and falling sharply after retirement. Across all age groups, those affected by life

events were not as likely to indicate saving the maximum amount per month ($501+)

as those not affected. While they still saved, these individuals were not able to save

as much per month as those who were not affected by the life events mentioned.

This effect was especially pronounced in the pre-retirement age group indicating that

negative life events occurring immediately prior to retirement have the potential for

especially harmful financial results.

n important part of the behavior change process is not just understanding what you

spend; it’s also important to understand why you spend the way you do. It means not

just doing a budget and recording your spending. It also means examining all the

factors above to put your spending habits in context. You can’t change what you

don’t understand. Money Habitudes helps people understand their money habits and

attitudes because:

 It makes it fun and easy to understand how we spend, save, invest, go into

debt, give to others, etc.

 Is hands-on. Whether it’s financial education for adults or teens, no one likes

to just sit at a desk and listen to a lecture. Same thing goes for worksheets and

PowerPoints. People find many typical learning and assessment activities to be

boring. Money Habitudes isn’t.

 Is nonjudgmental. One thing that makes people so hesitant to think about their

spending and to talk about the way they spend and save is that it often feels

judgmental. With Money Habitudes, there is no right or wrong answer. Instead,

the goal is for people to feel comfortable discussing and explaining how and why

they spend the way they do.

 It helps people see spending patterns and the motivations behind them. Often

people discover that they spend with restraint when out with one friend but spend

with reckless abandon when out with another friend.

 The versatile financial activity can be used on one’s own, with a spouse or

partner, or as part of a financial education group, class or workshop.

How Do Teens Spend Their Money?

When it comes to how teens spend their own money, another study, the Teen

Market profile, by the Magazine Publishers of America shows what teens value the

most when it comes to spending:

 Clothing is the number one purchased item in terms of teen consumer

spending habits

 Entertainment items were also a big hit, such as video games and CDs

 Food and drink items, such as beverages, candy, lunch, and snacks were

popular

 Jewelry is high on the list of what teens girls buy, although guys also spend

money on jewelry items

 Cars or car parts were also a common purchase, especially among teen

guys

Ways to Save Money

Teen shoppers love good deals just as much as their parents. Here are some good

ways to keep money in their wallets:

  Have clothing swaps where teens trade clothes with peers

 Go to the dollar theatre more often

 Eat at home, rather than going out

 Be willing to wait until the hottest gadgets go on sale

 Avoid making junk food purchases, such as buying candy and sodas

A survey shows that some parents already want to educate their children on

money management at a young age. Cha-Ching; a financial education programme

was form for students by Dr. Alice Wilder, an expert in educational and child

psychology, takes an engaging and age-appropriate musical narrative approach to

teach children about four key fundamental money management concepts – Earn,

Save, Spend and Donate. This organization has crossed lots of countries and that

includes Philippines.

211 children between seven and 12 years old participated in the

survey which was conducted in Metro Manila and Cebu. The children, who came

from various income classes, received an average of P157.60 in pocket money per

week. The survey found that most Filipino children do not save the majority of their

pocket money. 50% of them will spend and save about the same amount while 30%

of them spend the majority of their pocket money. 66% of children rely on their

parents or are “under parental supervision when it comes to (using) pocket money…

and they (70%) tend to plan ahead in terms of how much to save and spend.”

About two thirds or 67% of them save to buy things they want, while 24% will

request their parents or grandparents to purchase the items for them. Most children
(88%) are motivated to save so they can purchase computer-related products (24%),

and shoes, clothes or bags (24%). “Although kids have the practice to save up in

advance to buy things that they want, most perceived their parents to be affluent

(69%) and stated that family members are likely to fulfill their requests when they

want to buy certain things (79%),” according to Cimigo.

and since peer acceptance is important to teens, they make a lot of spending

decisions. Getting to know the spending habits of teens shows the great power they

have as consumers.

The question of savings has been of interest to both economists and psychologists.

From the economist point of view, the division of income between consumption and

saving can be seen as a matter of time preference in the use of income. It is to be

expected that all households would have a current time preference for a portion of

their incomes and consume at least some. Individual households will make the

division in widely different proportions, depending on the relative importance to them

of current consumption in relation to deferred use goals. Economists have long been

aware of the many factors which impact positively or negatively on saving behaviour.

These include income, number of dependants, stocks of liquid assets, value of

illiquid assets such as housing, stocks and condition of consumer durables, the price

level, interest rates, indebtedness, taxation and other government policies such as

those affecting superannuation (Beal, 2000).

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Psychologists concentrate on the process of making the actual decision to save.

They have differentiated savings into two classes: contractual saving by means of
mortgages or other loans and insurance type contracts where no further periodic

decisions are necessary once contracts have been agreed, and discretionary saving

where decisions are continually necessary to maintain the saving (Beal, 2000).

Personal incomes vary from one individual to another and also over time but without

a certain minimum income, no saving is possible at all. A general improvement in the

standard of living, via the growth of average real incomes per head and the levelling

of social inequalities, steadily raises the number of possible savers, but the actual

amount saved at different times varies in accordance with the person’s willingness to

set aside part of their income. Although the savings potential may grow, the savings

ratio may remain unaltered if the propensity to save does not rise in its turn;

contrariwise, the amount saved out of the same household income may be very

different at different times (Cole and Utting, 1957).

The United States experienced a precipitous declined in its national

Understanding the nature of household savings behaviour is critical in designing

policies to promote savings and investment (Attanasio and Banks, 2001). Given the

differences in the economic environment of the developing and industrial countries

there should be substantial variation in the household behaviour (Muradoglu and

Taskin, 1996). The close relation between savings and growth makes the analysis of

savings behaviour naturally important for policy analysis. Savings behaviour shows

considerable variation across countries depending upon level of development and

socio-economic structure and so one cannot be sure whether the results of a region

or

University of Ghana http://ugspace.ug.edu.gh 6

country under study may be applicable to a particular country or region of interest.

Thus, cross-country regression analysis based on the assumption of homogeneity

cannot be used as definitive study for any specific country of interest. For this

reason, country and regional studies have an importance of their own (Agrawal et al,

2009).

Beal (2000) noted that the level of aggregate savings has significant macroeconomic

impacts on an economy and even though developing economies need savings to

generate investment funds, savings tend to be low. Quartey and Blankson (2008)

noted that the level of savings in Ghana is very low even though it is a necessary

engine of economic growth. They believed that a combination of micro and macro-

economic and political factors explain Ghana’s low savings during the 1990s (1991

to 1999). They further note that despite the numerous macro-financial policies that

the country pursued in the 1990s, the rate of savings remained low.

Nissanke and Aryeetey (1998) note that of 29 African countries, the World Bank in

1994 classified Ghana, Tanzania and Nigeria among those countries that had

experienced a substantial improvement in macroeconomic policies and had achieved

better GDP per capita growth. However the national statistics show that the savings-

investment gap has been widening in Ghana, Malawi and Tanzania. The large

increase in domestic investment has been supported by a significant rise in foreign

savings (i.e. foreign capital inflows). In these three countries, the savings ratio

remained depressingly low, far below the average for countries in Sub Saharan

Africa (13%). This pattern in savings-investment nexus was evident for a longer

period of time than expected (1975-92).

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Abdelkhalek, T., Arestoff, F., de Freitas, N. E. M., & Mage, S. (2009). A micro

econometric analysis of households saving determinants in Morocco. The 1st GDRI

DREEM Conference, Istanbul, 21-23 May 2009.

Adams, D. W. (1978). Mobilizing Household Savings through Rural Financial

Markets. Economic Development and Cultural Change, 26, 547-60.

Agrawal, P., Sahoo, P., and Dasha, R. K. (2009). Savings behaviour in South Asia.

Journal of Policy Modelling 31 (2009) 208–224

Alessie, R., Lusardi, A. & Aldershof, T. (1997). Income and wealth over the life cycle:

Evidence from panel data. Review of Income and Wealth, 43(1), 1–32.
Alguacil, M., Cuadros, A. and Orts, V. (2004). Does saving really matter for Growth?

Mexico (1970–2000). Journal of International Development 16, 281–290 (2004)

Ando, A., & Modigliani, F. (1963). The Life-Cycle Hypothesis of Saving: Aggregate

Implications and Tests. American Economic Review, 53(1), 55 84.

Athukorala, P., & Sen, K. (2004). The determinants of private saving in India. World

Development, 32, 491-503.

Attanasio, O.P. and Banks, J. (2001). The assessment of household savings –

Issues in theory and Policy. Oxford review of Economic Policy, Vol. 17, No. 1

Athukorala, P., & Sen, K. (2004). The determinants of private saving in India. World

Development, 32, 491-503

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Attanasio, O.P. (1998). Cohort analysis of savings behavior by US households. The

Journal of Human Resources, 33(3), 575-609.

Artus, P. (2002). Allongement de l'esperance de vie et choix du systeme de retraite.

Revue Economique, 53(4), 809 824.

Beal, D. J. (2000). Saving in Australia: How do savers decide on the amount?

Economic Papers: A journal of applied economics and policy, 19: 33–43.’

Bersales, L. G. S., & Mapa, D. S. (2006). Patterns and determinants of household

saving in the Philippines (EMERGE Technical Report). Makati City, EMERGE

Beverly, S., and Sherraden, M. (1999). Institutional determinants of savings:

Implications for low- income households. Journal of Socio-Economics, 28, 457-473.

Borsch-Supan, A. (1992). Saving and consumption patterns among the elderly: The

German case. Journal of Population Economics 5:289-303.

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Economic Activity, Vol. 1991, No. 1, pp. 183-256

Browning, M., & Lusardi, A. (1996). Household saving: Micro theories and micro

facts. Journal of Economic Literature, XXXIV(4), 1797–1855.

Brown S. and Taylor, K. (2006). Financial Expectations, Consumption and Saving: A

Microeconomic Analysis. Fiscal Studies, Vol. 27, no. 3, pp. 313–338

Canova, L., A. M. M. Rattazzi and P. Webley (2005). The hierarchical structure of

saving motives. Journal of Economic Psychology 26 (2005) 21–34

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Chakrabarty, D., H. Katayami and H. Maslen (2008). Why do the rich save more? A

theory and Australian evidence. The Economic record, vol.84, special issue,

sept.2008, S32-S44

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A. (1977). Mobilization of Household savings: A tool for Development, Cassa di

risparmio delle provincie Lombarde, Milan

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 How Should A Teenager Handle Saving Vs. Spending?

Home > Budgeting articles > How Should a Teenager Handle Saving vs. Spending?

The saving vs. spending transition is

something of a rite of passage every teenager needs to experience in order to get on

the road to financial security and independence later in life. But it’s also a

surprisingly difficult lesson to learn, sincesaving money is a major component of

money management overall, and teens are usually seeing for the first time.

This is especially true once they land their first job, and begin earning money on

regular basis. But that’s also the perfect time for them to begin learning the critical

difference between saving vs. spending.

How do you make that happen mechanically?

Create The Motivation

There are four major obstacles to teaching teenagers the critical difference between

saving and spending; or more particularly, the need to save money at all:

1. Teenagers live in the moment (the I want it now syndrome)

2. Suddenly having money is like a high, making it difficult to control

3. The lack of financial obligations means a lack of spending priorities, or any

necessity to have them

4. Teenage optimism can kill the motivation to prepare for the future

When preparing teens to save money, you have to understand that each of these

factors are inherent in the teenage mindset. You can’t make them go away, so you

have to come up with a work-around strategy.

Simply telling your teen that they need to “save for the future” will probably be a

waste of time. Most teens just don’t get the concept. Instead, start by setting near-

term goals, such as saving money to buy a car, to have spending money at college,

to pay for a vacation or a trip, or whatever it is that might motivate them.

The goal has to be both tangible from a teenage perspective, and within the

foreseeable future. Start by asking your teen what they want badly enough to save

money for, and take it from there.

Developing Good Habits That Will Last A Lifetime

Not all parents are motivated to teach their kids to save. You might find it

necessary to first motivate yourself to be prepared to pass this lesson on your

teenager. If you’ve been a saver all of your life, then you understand the benefits.

Some of those benefits include:

 Having enough cash available to avoid going into debt

 Worrying a lot less about money problems because you have a cushion

 Being able to save money to buy and do the things that you want

 Creating long-term financial security through investing andsaving for

retirement

 Having the greater flexibility that having money provides

If you’ve never been a saver yourself, you’re probably aware of the disadvantages

that not having money leaves you with, and you’ll want teach your teenager a better

way.

Even if your teenager doesn’t realize it, mastering the saving vs. spending balance

will have important consequences throughout their lives. The sooner that they grasp

that there needs to be a balance, that saving money will be absolutely essential to

their future security and prosperity, the more effective the lesson will be.

Savings Strategies For Teenagers

We should never assume that teenagers know how to save money, as though it’s as

natural as walking and eating. To a kid who’s never done it before, it’s the true act of
learning an entirely new survival skill – and that’s how it needs to be treated. Try

some of the following strategies, and see which one works best.

Spend The Odd Amount And Bank The Rest

This is a strategy that I used myself when I first started working as a teenager. I

would keep the odd amount of my pay to spend, but bank the larger chunk. For

example, if my paycheck for the week was $147, I’d put $100 in the bank, then keep

$47 – the odd amount – for myself to spend. There would be no limit on my spending

of the odd amount, which gave me a sense of having control over my money. A

rising bank balance didn’t hurt on that front either.

Set A Weekly Savings Budget

Your teenager can also decide on saving a flat amount of money out of each

paycheck. Even if it’s a small amount, say $25, it’s a step in the right direction. Your

teen can start out with a small amount for savings, and increase it over time as

their motivation to save increases.

Do The Saving For Them

Some teenagers seem to be better at adopting a savings habit than others. If your

teen is having a particularly difficult time with it, you may need to get more directly

involved. Rather than relying on your teenager to save a certain amount of money,
you can instead have them turn a certain amount of money over to you, which you

will then put into a savings account.

If you are at all concerned that the teen will access and spend the money in the

bank, you can set up a custodial account giving yourself primary control. That will not

only allow you to deposit money in the account, but it will also give you full control

over how the money in the account will be spent.

Set Up A Payroll Deduction

Even for part-time jobs, many employers will allow you to set up payroll deductions

into specific accounts. Just as they would if they were an adult with a full-time job,

your teenager can set up a payroll allocation, that will have some money going into

the checking account for spending, while the rest goes in savings. The fact that it

happens by direct deposit will remove the human factor from the equation.

It’s important to understand that no teenager will save all of their money, so that

objective has to be abandoned no matter how important the reason for saving might

be. They have to maintain some control over some of their money, even if they

spend it in ways that you consider to be completely frivolous. The critical first step is

getting them to save money at all, and then to adopt it as a good habit going forward.

If you can accomplish at least that much, you‘ll have them heading in the right

direction. And where they will go with it as they get older will be completely up to

them.

How are you planning on helping your teenager manage their saving vs.

spending? Leave a comment!

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Published date: November 14, 2014

2 Comments
 1. Melody

November 17, 2014

It has always been my opinion that it is a crime that we do not teach

time value of money and compound interest as a math lesson in

school. I think that teens should learn this lessons, and you provide

many tips here for just that.

2. JP

November 17, 2014

Great topic. My parents had me working from the age of 12. Moving

lawns was my first gig. At age 13 my Mom brought me into the local

grocery store (whose bi-line was “home of the red carpet service”) and

asked the manager if they would take me. A year later when it was

actually legal for me to work in the state of Illinois I became a bagerg.

Working hard for a dollar was always expected of me. How to save a

dollar was not.

Later in life I graduated from college and bought a condo, bought new

suits and drove around in a brand new car.

My savings notions were upside down.

Candidly, it starts with the parents. Kids (including teenagers) pick up

on their parent’s attitude towards money. Once teenage angst departs

they float back to those familiar parental habits.

Some ideas:

1. Demonstrate the wonders of compound interest by putting a $1 in a

jar each day and treat each day like a year to see. Watch the interest

grow with them.

2. Make them pay for things they care about – prom, dates, some of

their clothes.

3. Set up a ROTH IRA if they work. Even if they don’t see the value do

it anyway.
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Tennesseans Christopher T. Sneed, MS & Dena K. Wise, PhD, The University of

Tennessee Extension Key Words - savings behavior, age, savings amount