2019 Conference

personality, saving behavior, low-income individuals, IDA participants

To help low-income households gain self-sufficiency and build wealth, the U.S. Congress initiated the Assets for Independence Act in 1998. One strategy in the act is to encourage families to save by establishing Individual Development Accounts (IDAs), a matched savings program. The federal government established this program particularly for those with income at or below 200% of the federal poverty line. The IDA saving program provides a dollar-for-dollar match, most commonly $2 for every $1 dollar saved by program participants. IDAs encourage asset building for low-income families who do not access other government benefit programs. The IDA program aims to incentivize regular saving, it is typically assumed that the low savings rate in the IDA program is due to liquidity constraints in its targeted low-income population. Based on the findings in the behavioral economics literature, we propose that liquidity constraints do not fully explain saving decisions of IDA program (a matched savings program) participants and hypothesize that psychological factors may play an important role in savings decisions. To test this assumption, our study investigates the individual differences that may influence saving behavior of low-income families who participate in an IDA program.