The association between saving disposition and financial distress: A genetically informed approach

Abstract

Saving disposition, the tendency to save rather than consume, has been found to be associated with economic outcomes. People lacking the disposition to save are more likely to experience financial distress. This association could be driven by other economic factors, behavioral traits, or even genetic effects. Using a sample of 3,920 American twins, we develop scales to measure saving disposition and financial distress. We find genetic influences on both traits, but also a large effect of the rearing family environment on saving disposition. We estimate that 44% of the covariance between the two traits is due to genetic effects. Saving disposition remains strongly associated with lower financial distress, even after controlling for family income, cognitive ability, and personality traits. The association persists within families and monozygotic twin pairs; the twin who saves more tends to be the twin who experiences less financial distress. This result suggest that there is a direct association between saving disposition and financial distress, although the direction of causation remains unclear.

Keywords: genetics; income; saving; twins.

Figure 1:

Correlation matrix. 95% confidence intervals in brackets; all correlations are statistically significant (p < 0.001).

Figure 2:

Biometric analysis. The 95% confidence interval is given below each estimate. a² = proportion of variance that is due to A (additive genetics effects); c² = proportion of variance that is due to C (common family environment); e² = proportion of variance that is due to E (unique environment); r_g = genetic correlation; r_c = common environmental correlation; r_e = unique environmental correlation.