SAVINGS AND PERSONAL DISCOUNT RATES IN A MATCHED SAVINGS PROGRAM FOR LOW-INCOME FAMILIES

The ability to save for future needs is critical to family well-being and is especially challenging for low-income families with little extra income and limited access to institutional structures like employment-based retirement funds or low cost savings mechanisms. Many nonprofits and governments have created new savings vehicles to fill this void. The ability of families to succeed in these programs may depend on their personal discount rates (time preferences). In this paper, we use survey data from a matched savings program and factor analysis to characterize family time preferences in order to predict their influence on savings levels. We find that a single latent factor describing the level of discount rates (rather than other dimensions of time or amount inconsistency) best describes family differences and is significantly related to the ability of families to save within the program. (JEL D91, I30)