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Top1. Introduction
Understanding household saving motives is important, especially, in developing countries where unlike developed nations a solid social security system does not exist, and consequently households are less likely to live a secure and balanced life in the absence of an appropriate savings plan (Remble et al., 2013). So, savings play an important role to meet financial emergencies and reduce risk of having inadequate resources in future (Haron et al. 2013). Household savings affect a family’s standard of living and improve the capability to meet financial goals such as making purchases using cash rather than credit. Saving out of current earning provides retirement security, helps occupants to become homeowners without undue risks, and improves household’s ability to deal with emergency situations, such as accidents, any case of death and other purposes.
Despite the fact that understanding household saving motives is important for improving our knowledge of households’ financial goals, and enhancing our ability for households’ financial counseling, empirical research on this issue is rare (Claycamp, 1963; Davis and Schumm, 1987; Xiao and Noring, 1994; Haronet al., 2013). Advancement in this line of research can help us understand household saving behaviors from both theoretical and practical perspective (Canova et al., 2005).
Some economic models provide insights into household saving motives but have been criticized by contemporary researchers. Xiao and Noring (1994) and Haron et al. (2013) described two major shortcomings of Economic Models. First, economic models assume saving motives but without any empirical investigation. Second, economic models assume only one saving motive, such as saving for retirement in (Modigliani, 1986), and ignore that the savings can undertake multiple motives. In order to address these shortcomings, behavioral/psychological models were considered in the study of saving motives. In contrast to Keynesian thoughts of slow change in saving motives, behavioral models assume that tastes are not fixed, and household’s ability and willingness to save matters (Katona (1951, 1975) and DeVaneyet al. (2007). Shefrin and Thaler (1988) integrated psychological theory into the standard economic model of saving to propose a behavioral life-cycle hypothesis. Their hypothesis views people as both planners and doers. As planners, they worry about lifetime utility and as doers they give attention to the present (DeVaneyet al. 2007). According to this hypothesis people tend to save for different motives. Moreover, saving motives differ among the households with different characteristics (Yao et al. 2015).