Social Influence And Savings Behavior: Evidence From A Developing Country Context

Main Article Content

Eva Mpaata
https://orcid.org/0000-0002-7958-6299
Naomy Koskei
https://orcid.org/0000-0001-5753-532X
Ernest Saina

Abstract

Purpose: This paper highlights the relevance of Savings Behavior and the impact of Social Influence on Savings Behavior in a developing country utilizing both life cycle and economic theories


Methodology: This paper presents findings from a thorough review of the literature. Relevant articles were reviewed on both savings behavior and social influence. The articles consisted of both contexts developed versus developing.


Findings: The findings suggest that from the developed country context, Social Influence positively affects Savings Behavior, which is not the case for the developing economies that show the negative impact of social influence on savings behavior. Therefore, financial education and literacy training are two of the means of encouraging individual self-control in these developing economies despite their vulnerability to social influence to encourage positive savings behavior.


Implications: Individuals are encouraged to save, especially during their productive ages, along with their lifespan. This can be done by obligatory deductions for those that are officially employed.


Originality/Value: This paper reveals a bibliography theoretical review on Social Influence and Savings Behavior within the developing country context. The paper presents the puzzle about the effect of Social Influence and Savings Behavior in the emerging economy. The majority of savings behavior research undertaken in the developed economies shows the positive effect of social influence on savings behavior, which is not the case in the developing economies.

Downloads

Download data is not yet available.

Article Details

How to Cite
Mpaata, E., Koskei, N. ., & Saina, E. (2020). Social Influence And Savings Behavior: Evidence From A Developing Country Context. SEISENSE Journal of Management, 3(4), 56–67. https://doi.org/10.33215/sjom.v3i4.396
Section
Accounting & Finance

References

Alwi, S., Amir Hashim, I. Z., & Ali, M. S. (2015). Factors affecting savings habits within millennials in Malaysia: Case study on students of Taylor’s University. Paper presented at The Fourth Asia-Pacific Conference on Global Business, Economics, Finance and Social Sciences.

Ando, A., & Modigliani, F. (1963). The" life cycle" hypothesis of saving: Aggregate implications and tests. The American economic review, 53(1), 55-84.

Ariffin, M. R., Sulong, Z., & Abdullah, A. (2017). Students’ Perception towards Financial Literacy and Saving Behavior. World Applied Sciences Journal, 35(10), 2194-2201.

Asare, E., Segarra, E., Gertrude, N., & Asiseh, F. (2018). Explaining the Saving Behavior of Households’ in Ethiopia, Africa. Applied Economics and Finance, 5(2), 143-151. DOI: https://doi.org/10.11114/aef.v5i2.2923

Awais, M., Laber, M. F., Rasheed, N., & Khursheed, A. (2016). Impact of Financial Literacy and Investment Experience on Risk Tolerance and Investment Decisions: Empirical Evidence from Pakistan. International Journal of Economics and Financial Issues, 6(1), 73-79.

Bonga-Bonga, L., & Guma, N. (2017). The relationship between savings and economic growth at the disaggregated level. Economia Internazionale, 70(1), 1-24.

Bowen, C. F. (2002). Financial knowledge of teens and their parents. Financial counseling and planning, 13(2), 93-102.

Browning, M., & Lusardi, A. (1996). Household saving: Micro theories and micro facts. Journal of Economic Literature, 34(4), 1797-1855.

Bucciol, A., & Veronesi, M. (2014). Teaching children to save: What is the best strategy for lifetime savings? . Journal of Economic Psychology(45), 1-17. DOI: https://doi.org/10.1016/j.joep.2014.07.003

Chowa, G. A., Masa, R. D., & Sherraden, M. (2012). Wealth effects of an asset-building intervention among rural households in Sub-Saharan Africa. Journal of the Society for Social Work and Research, 3(329-345). DOI: https://doi.org/10.5243/jsswr.2012.20

Collins, J., & Hussey, R. (2009). Business Research: A practical guide for undergraduate and postgraduate students (3 ed.). New York: Palgrave Macmillan.

Dangol, J., & Maharjan, S. (2018). Parental and Peer Influence on the Saving Behavior of the Youth. Nepal: Tribhuvan University.

De Noose, C. (2011). Best Practices in Microsaving for Successfully and Sustainably Reaching the Poor. http://www.savings-banks.com

Deaton, A. (2005). Measuring poverty in a growing world (or measuring growth in a poor world). Review of Economics and Statistics, 87(1), 1-19. DOI: https://doi.org/10.1162/0034653053327612

Demirguc-Kunt, A., Klapper, L., Singer, D., & Van Oudheusden, P. (2015). The Global Findex Database 2014: Measuring Financial Inclusion around the World. Retrieved from Washington, DC: DOI: https://doi.org/10.1596/1813-9450-7255

Duflo, E., & Saez, E. (2002). Participation and investment decisions in a retirement plan: The influence of colleagues’ choices. Journal of Public Economics, 85(1), 121-148. DOI: https://doi.org/10.1016/S0047-2727(01)00098-6

Dupas, P., & Robinson, J. (2013). Savings constraints and microenterprise development: Evidence from a field experiment in Kenya. American Economic Journal: Applied Economics, 5(1), 163-192. DOI: https://doi.org/10.1257/app.5.1.163

Elias, S., & Worku, A. (2015). Causal relationship between gross domestic saving and economic growth in east Africa: evidence from Ethiopia, Uganda and Kenya. Journal of Agriculture and Social Research (JASR), 15(2), 31-39.

Erskine, M., Kier, C., Leung, A., & Sproule, R. (2006). Peer crowds, work experience, and financial saving behavior of young Canadians. Journal of Economic Psychology, 27(2), 262-284. DOI: https://doi.org/10.1016/j.joep.2005.05.005

Findley, T. S., & Caliendo, F. N. (2015). Time Inconsistency and Retirement Choice Economics Letters(129), 4-8. DOI: https://doi.org/10.1016/j.econlet.2015.01.027

Firmansyah, D. (2014). The Influence of Family Backgrounds toward Student Saving Behavior: A Survey of College Students in Jabodetabek. International Journal of Scientific and Research Publication,, 4(1), 1-6.

Franzoi, S. L. (2006). Social psychology (Vol. 4th ed.). New York:: McGraw-Hill.

Geda, A., & Shimeless, A. (2006). Openness, inequality and poverty in Africa. Retrieved from

Gerhard, P., Gladstone, J. J., & Hoffmann, A. O. (2018). Psychological characteristics and household savings behavior: The importance of accounting for latent heterogeneity. Journal of Economic Behavior & Organization, 148, 66-82. DOI: https://doi.org/10.1016/j.jebo.2018.02.013

Gourinchas, P. O., & Parker, J. A. (2002). Consumption over the life cycle Econometrica, 70(1), 47-89. DOI: https://doi.org/10.1111/1468-0262.00269

Herawati, N. T., Candiasa, I. M., Yadnyana, I. K., & Suharsono, N. (2018). Factors That Influence Financial Behavior among Accounting Students in Bali. International Journal of Business Administration, 9(3), 30-38. DOI: https://doi.org/10.5430/ijba.v9n3p30

Hira, T. K. (1997). Financial attitudes, beliefs and behaviors: Differences by age. Journal of Consumer Studies and Home Economics, 21, 271-290. DOI: https://doi.org/10.1111/j.1470-6431.1997.tb00288.x

Homan, A. M. (2016). The influence of parental financial teaching on saving and borrowing behavior. (Masters), University of University of Groningen.

Jamal, A. A. A., Ramlan, W. K., Karim, M. A., & Osman, Z. (2015). The effects of social influence and financial literacy on savings behavior: A study on students of higher learning institutions in Kota Kinabalu, Sabah. International Journal of Business and Social Science, 6(11), 110-119.

Jappelli, T., & Modigliani, F. (1998). The age-saving profile and the lifecycle hypothesis. CSEF working paper, (No. 9).

Joshi, A., Pradhan, S., & Bist, J. P. (2019). Savings, investment, and growth in Nepal: an empirical analysis. Financial Innovation, 5(1). DOI: https://doi.org/10.1186/s40854-019-0154-0

Kaberuka, W., & Namubiru, R. (2014). The effect of remittances on gross domestic savings in Uganda (1999-2011). International Journal of Business Management and Administration, 3(2), 29-39.

Karlan, D., Ratan, A. L., & Zinman, J. (2014). Savings by and for the Poor: A Research Review and Agenda. Review of Income and Wealth, 60(1), 36-78. DOI: https://doi.org/10.1111/roiw.12101

Kast, F., Meier, S., & Pomeranz, D. (2018). Saving more in groups: Field experimental evidence from Chile. Journal of Development Economics, 133, 275-294. DOI: https://doi.org/10.1016/j.jdeveco.2018.01.006

Keynes, J. M. (1936). The general theory of interest, employment and money.

Khatun, M. (2018). Effect of Financial Literacy and Parental Socialization on Students Savings Behavior of Bangladesh. International Journal of Scientific and Research Publications, 8(12), 296-305. DOI: https://doi.org/10.29322/IJSRP.8.12.2018.p8440

Kudaisi, B. V. (2013). Savings and its determinants in West Africa countries. Journal of Economics and Sustainable Development, 4(18), 107-119.

Ky, S., Rugemintwari, C., & Sauviat, A. (2018). Does mobile money affect saving behaviour? Evidence from a developing country. Journal of African Economies, 27(3), 285-320. DOI: https://doi.org/10.1093/jafeco/ejx028

Laible, D. J., Carlo, G., & Roesch, S. C. (2004). Pathways to self-esteem in late adolescence: The role of parent and peer attachment, empathy, and social behaviors. Journal of adolescence, 27(6), 703-716. DOI: https://doi.org/10.1016/j.adolescence.2004.05.005

Lyons, A. C. (2007). Credit practices and financial education needs of Midwest college students. Networks Financial Institute Working Paper, (2007-WP). DOI: https://doi.org/10.2139/ssrn.1060801

Mahdzan, N. S., & Tabiani, S. (2013). The impact of financial literacy on individual saving: An exploratory study in the Malaysian context. Transformations in Business & Economics, 12(1), 41-55.

Mangleburg, T. F., Doney, P. M., & Bristol, T. (2004). Shopping with friends and teens’ susceptibility to peer influence. Journal of retailing, 80(2), 101-116. DOI: https://doi.org/10.1016/j.jretai.2004.04.005

Modigliani, F. (1970). The life cycle hypothesis of saving and inter-country differences in the saving ratio. Induction, growth and trade, 197-225.

Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function: An interpretation of cross-section data. Post-keynesian economics, 1, 338-436.

Njenga, G., Onuonga, S. M., & Sichei, M. M. (2018). Institutions’ effect on households’ savings in Kenya: A ranked ordered multinomial/conditional probit model approach. Retrieved from

Norvilitis, J. M., & MacLean, M. G. (2010). The role of parents in college students’ financial behaviors and attitudes Journal of Economic Psychology, 31(1), 55-63. DOI: https://doi.org/10.1016/j.joep.2009.10.003

Otto, A. (2013). Saving in childhood and adolescence: Insights from developmental psychology. Economics of Education Review, 33, 8-18. DOI: https://doi.org/10.1016/j.econedurev.2012.09.005

Prawitz, A., Garman, E. T., Sorhaindo, B., O'Neill, B., Kim, J., & Drentea, P. (2006). InCharge financial distress/financial wellbeing scale: Development, administration, and score interpretation. Journal of Financial Counseling and Planning, 17(1).

Romer, P. M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002-1037. DOI: https://doi.org/10.1086/261420

Sabri, M. F., & MacDonald, M. (2010). Savings behavior and financial problems among college students: The role of financial literacy in Malaysia. Cross-Cultural Communication, 6(3), 103-110.

Sam, Y., Geetha, C., & Mohidin, R. (2012). What were the factors that influence financial management behavior of undergraduates? . International Journal of Business Trends and Technology, 2(1), 2249-0183.

Shim, S., Barber, B. L., Card, N. A., Xiao, J. J., & Serido, J. (2010). Financial socialization of first-year college students: The roles of parents, work, and education. Journal of Youth and Adolescence, 39(12), 1457-1470. DOI: https://doi.org/10.1007/s10964-009-9432-x

Sinclair, R., & Singh, N. (2015). Savings Groups and their Role in Child Wellbeing: A Primer for Donors.

Solow, R. M. (1956). A contribution to the theory of economic growth. The quarterly journal of economics, 70(1), 65-94. DOI: https://doi.org/10.2307/1884513

Supanantaroek, S., Lensink, R., & Hansen, N. (2017). The impact of social and financial education on savings attitudes and behavior among primary school children in Uganda. Evaluation Review, 41(6), 511-541. DOI: https://doi.org/10.1177/0193841X16665719

Tharanika, K., & Andrew, A. (2017). Factors Influencing On Saving Behavior Among University Students. 4(14), 861-871.

Turan, G., & Gjergji, O. (2014). What is the impact of savings on growth? The case of a small open economy (Albania). Mediterranean Journal of Social Sciences, 5(13). DOI: https://doi.org/10.5901/mjss.2014.v5n13p360

Webley, P., & Nyhus, E. K. (2006). Parents’ influence on children’s future orientation and saving. Journal of Economic Psychology, 27(1), 140-164. DOI: https://doi.org/10.1016/j.joep.2005.06.016

World Bank. (2017). End Extreme Poverty: Boost Shared Prosperity. Retrieved from Washington, D.C.: http://documents.worldbank.org/curated/en/143021506909711004/World-Bank-Annual-Report-2017

Zaihan, N. D. (2016). Determinants of saving behavior among generation Y students in Universiti Utara Malaysia. (PhD), Universiti Utara Malaysia.