Financial factors and saving behavior of salaried class: A case study of Rawalpindi, Pakistan
Main Article Content
Abstract
Human economic decisions are based on their preferences and motivations, which maximize their degree of happiness and lead to a better outcome in their lives. The majority of saving decisions are made by households. Different demographic, societal, and economic factors influence these choices. This study uses primary data from 243 salaried class households to investigate the behavioral aspects that influence human decision making. The main factor that affects the decision to save money is financial hardship. Households of the salaried class experience financial stress due to impulsive behavior, consumer debt, consumer financing products, pro-consumptive behavior, family financial support, and domestic externalities. The marginal effects of the agreed upon region, or "agree" and "strongly agree," demonstrate that important factors play a role in determining financial stress. Consumer loans account for 7.5% of financial stress, family financial support for 3.8%, and domestic externalities for 4.3%. The marginal effects of the Ordinary Logit saving model in the accepted region demonstrate that consumer loans have a 3.5% impact on saving behavior, while pro-consumptive behavior has a 3.6% impact and domestic externalities have a 1.9% impact. The consumer loan, pro consumptive behavior, and domestic externalities all have a negative effect on the saving behavior of the salaried class, according to the saving OLOGIT model. Government should give pro saving households special incentives. Government can help consumers by providing expensive goods with 0% interest in the event of hire purchasing.
Article Details
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).
References
Agrigoroaei, S., Lee-Attardo, A., & Lachman, M. E. (2017). Stress and subjective age: those with greater financial stress look older. Research on aging, 39(10), 1075-1099. DOI: https://doi.org/10.1177/0164027516658502
Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decision Processes, 50, 179-211. De Young, 50(2), 509-526. DOI: https://doi.org/10.1016/0749-5978(91)90020-T
Aniola-Mikolajczak, P., &Golas, Z. (2014). The socioeconomic conditions of saving behaviors in Polish households. Acta ScientiarumPolonorum. Oeconomia, 13(4).
Antony, J. (2018). A Study on Consumer Debt Stress Caused by Credit Cards. Arabian J. Bus Manag Review, 8(336), 2.
Angamuthu, r. (2020). A Study on Household Saving Behavior. A Journal of Composition Theory, 403-409, 0731-6755
Ammad, S., & Ahmed, Q. M. (2020). Comparative Efficacy of Life-Cycle and Absolute Income Hypothesis in Pakistan. The Journal of Developing Areas, 54(1). DOI: https://doi.org/10.1353/jda.2020.0005
Beard, G. M. (1972). American Nervousness: Its Causes and Consequences [1881]. New York, 65-67.
Britt, S. L., Canale, A., Fernatt, F., Stutz, K., & Tibbetts, R. (2015). Financial Stress and Financial Counseling: Helping College Students. Journal of Financial Counseling and Planning, 26(2), 172-186. DOI: https://doi.org/10.1891/1052-3073.26.2.172
Bevilacqua, L., & Goldman, D. (2013). Genetics of impulsive behavior. Philosophical Transactions of the Royal Society B: Biological Sciences, 368(1615), 20120380. DOI: https://doi.org/10.1098/rstb.2012.0380
Bertaut, C. C., & Haliassos, M. (2006). Credit cards: facts and theories. The economics of consumer credit, 181-237. DOI: https://doi.org/10.2139/ssrn.931179
Cronqvist, H., & Siegel, S. (2015). The origins of savings behavior. Journal of Political Economy, 123(1), 123-169. DOI: https://doi.org/10.1086/679284
Cook, A. J., Kerr, G. N., & Moore, K. (2002). Attitudes and intentions towards purchasing GM food. Journal of Economic Psychology, 23(5), 557-572. DOI: https://doi.org/10.1016/S0167-4870(02)00117-4
Delafrooz, N., &Paim, L. H. (2011). Determinants of financial wellness among Malaysia workers. African Journal of Business Management, 5(24), 10092-10100. DOI: https://doi.org/10.5897/AJBM10.1267
Drentea, P., &Lavrakas, P. J. (2000). Over the limit: the association among health, race and debt. Social science & medicine, 50(4), 517-529. DOI: https://doi.org/10.1016/S0277-9536(99)00298-1
Durante, K. M., &Laran, J. (2016). The effect of stress on consumer saving and spending. Journal of Marketing Research, 53(5), 814-828. DOI: https://doi.org/10.1509/jmr.15.0319
Davis, C. G., &Mantler, J. (2004). The consequences of financial stress for individuals, families, and society. Centre for Research on Stress, Coping and Well-being. Carleton University, Ottawa: Department of Psychology.
Frączek, B. (2011). The factors affecting the level of household savings and their influence on economy development. Retrieved september, 21, 2015.
Farmer, R. F., & Golden, J. A. (2009). The forms and functions of impulsive actions: Implications for behavioral assessment and therapy. International Journal of Behavioral Consultation and Therapy, 5(1), 12. DOI: https://doi.org/10.1037/h0100870
Gedela, S. P. R. (2012). Determinants of saving behavior in rural and tribal households (An empirical analysis of Visakhapatnam District). International Journal of Research in Social Sciences, 2(3), 108.
Gujarathi, D. M. (2022). Gujarati: Basic Econometrics. McGraw-hill.
Njenga, G., Onuonga, S. M., &Sichei, M. M. (2018). Institutions effect on households savings in Kenya: A ranked ordered multinomial/conditional probit model approach. Journal of Economics and International Finance, 10(5), 43-57. DOI: https://doi.org/10.5897/JEIF2018.0896
Hakkio, C. S., & Keeton, W. R. (2009). Financial stress: what is it, how can it be measured, and why does it matter?. Economic Review, 94(2), 5-50.
Ismail, S., Khairuddin, N. S., Alias, N. E., Loon-Koe, W., & Othman, R. (2018). An empirical analysis of saving behavior among Malaysian employees. International Journal of Academic Research in Business and Social Sciences, 8(10), 1070-1080. DOI: https://doi.org/10.6007/IJARBSS/v8-i10/4822
Jilani, S., Sheikh, S. A., Cheema, F.-E., & Shaik, A.-u.-H. (2013). Determinants of national savings in Pakistan: an exploratory study. Asian Social Science, 9(5), 254. DOI: https://doi.org/10.5539/ass.v9n5p254
Khan, T., Gill, A. R., & Haneef, S. (2013). Determinants of Private Saving: A Case of Pakistan. Asian Journal of Economic Modelling, 1(1), 1-7.
Kreps, D. M. (1990). A course in microeconomic theory. Princeton university press. DOI: https://doi.org/10.1515/9780691215747
Lim, H., Heckman, S., Montalto, C. P., &Letkiewicz, J. (2014). Financial stress, self-efficacy, and financial help-seeking behavior of college students. Journal of Financial Counseling and Planning, 25(2), 148-160.
Mann, R. J. (2002). Credit cards and debit cards in the United States and Japan. Vand. L. Rev., 55, 1055. DOI: https://doi.org/10.2139/ssrn.263009
Mensahkla, E., Kornu, D. D., & Dom, B. (2017). An empirical analysis of the determinants of saving behavior by households in Ho, Ghana: A case study of Ho municipality, an individual level analysis. Journal of Economics and Sustainable Development, 8(6), 7-17. ISSN 2222-1700
Mwangi, I. W. (2020). Household Saving Behavior in Kenya: A discrete choice approach. Journal of Economics and Sustainable Development, 11(4). ISSN 2222-1700
Northern, J. J., O'Brien, W. H., & Goetz, P. W. (2010). The development, evaluation, and validation of a financial stress scale for undergraduate students. Journal of College Student Development, 51(1), 79-92. DOI: https://doi.org/10.1353/csd.0.0108
Ponnet, K. (2016). Financial stress. In Encyclopedia of adolescence (pp. 1-4). Springer International Publishing. DOI: https://doi.org/10.1007/978-3-319-32132-5_801-1
Rossi-Hansberg, E., &Sarte, P. D. (2012). Economics of housing externalities. International Encyclopedia of Housing and Home, 2, 47-50. DOI: https://doi.org/10.1016/B978-0-08-047163-1.00102-8
Rehman, H.-u., Bashir, F., &Faridi, M. Z. (2011). Saving behavior among different income groups in Pakistan: a micro study. International Journal of Humanities and Social Science, 1(10), 268-277.
Rikwentishe, R., Pulka, B. M., &Yamta, H. A. (2015). Analysis of Socioeconomic Factors Affecting Savings Habits in Jalingo Taraba State. Journal of Business and Management, 17(8), 01-06.
Syed, H., Nigar, S., & Ullah, S. (2017). An Analysis of Household Saving and Investment Behavior among Different Income Groups in Urban Area of District Peshawar. iBusiness, 9(04), 188. DOI: https://doi.org/10.4236/ib.2017.94013
Siddiqui, R., Siddiqui, R., & Niazi, M. K. (1993). Household Saving Behavior in Pakistan [with Comments]. The Pakistan Development Review, 32(4), 1281-1292. DOI: https://doi.org/10.30541/v32i4IIpp.1281-1292
Soharwardi, M. A., Khan, A. S., & Sheran, M. (2015). Determinants of household savings. A case study of Yazman-Pakistan. International Journal of Scientific and Engineering, 5(12), 1624-1630.
Satsios, N., &Hadjidakis, S. (2018). Applying the Theory of Planned Behavior (TPB) in saving behavior of Pomak households. International Journal of Financial Research, 9(2), 122-133. DOI: https://doi.org/10.5430/ijfr.v9n2p122
Strömbäck, C., Lind, T., Skagerlund, K., Västfjäll, D., &Tinghög, G. (2017). Does self-control predict financial behavior and financial well-being?.Journal of Behavioral and Experimental Finance, 14, 30-38. DOI: https://doi.org/10.1016/j.jbef.2017.04.002
Tran, A. G., Lam, C. K., & Legg, E. (2018). Financial stress, social supports, gender, and anxiety during college: A stress-buffering perspective. The Counseling Psychologist, 46(7), 846-869. DOI: https://doi.org/10.1177/0011000018806687
Uher, J. (2016). What is behavior? And (when) is language behavior? A metatheoretical definition. Journal for the Theory of Social Behavior, 46(4), 475-501. DOI: https://doi.org/10.1111/jtsb.12104
Worthington, A. C. (2006). Debt as a source of financial stress in Australian households. International Journal of Consumer Studies, 30(1), 2-15. DOI: https://doi.org/10.1111/j.1470-6431.2005.00420.x