Fatalistic Tendencies: An Explanation of Why People Don’t Save

This paper uses data from the 2001 Survey of Consumer Finances to analyze household savings behavior. Individuals who are relatively pessimistic about the future of the economy or who deem themselves unlucky with financial affairs are more likely to realize their need to save, but are less likely to actually do so. The results hold after controlling for a number of demographic and behavioral factors, and are consistent across income and wealth levels. A possible explanation is that pessimistic people exhibit fatalism and do not save because they believe that they have little control over their future financial situations. Stephen Wu Department of Economics Hamilton College Clinton, NY 13323 315-859-4645 [email protected] * I thank James Choi, Christophre Georges, Paul Hagstrom, Ann Owen, Joel Shapiro and Julio Videras for helpful conversations and suggestions.