Close

News

How much you save may be influenced by your grandparents’ place of birth – new research

Our research shows that culture should be taken into account when designing incentives and policies for saving behaviour
- Dr Berkay Ozcan
Saving 747 x 560
Savings

UK-born grandchildren of immigrants tend to mirror the money saving behaviour of their grandparents’ country of birth, a new study from the London School of Economics and Political Science (LSE) published in the PLOS ONE journal has found.  

The study, which is the first of its kind to find a link between culture and saving behaviour, used long-term data to explore the saving habits of UK migrants, their children and their grandchildren and found that culture impacts on saving behaviour for up to three generations.

The researchers found that despite living under different economic and institutional conditions - such as a different tax and welfare system - to their country of birth, the money-saving behaviour of migrants and their children and grandchildren still tended to reflect that of their birth country.

For example, the UK-born children and grandchildren of people born in countries with high saving rates - such as China - tended to save at a higher rate. Likewise, the children and grandchildren of those from countries with low-saving rates tended to save at a lower rate.

The researchers suggest this is because different cultures place different levels of importance on saving which leads to ingrained saving behaviours and norms which continue to influence people’s behaviour outside of their birth country.   These norms are then passed down the generations through what the researchers call ‘intergenerational cultural transmission’, where parents pass their beliefs and values onto their children. 

Commenting, Dr Berkay Ozcan from the Department of Social Policy at LSE said:

“This study is important because it contributes to understanding the determinants of saving behaviour. Social scientists have been trying to understand determinants of saving behaviour in order to design various policies, such as retirement and pension policies, which are aimed at increasing savings. Our research shows that culture is an important determinant and should be taken into account when designing incentives and policies for saving behaviour.”

For a copy of the report, 'The cultural origin of saving behaviour’, please visit: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0202290

Share

Behind the article

  • The researchers used longitudinal data from the Understanding Society Survey to explore the saving behaviour of immigrants living in the UK. They used both self-reported and actual savings as measures of saving habits.
  • The focus on the UK enabled the researchers to observe people from many different countries of origin in the same environment (the UK) and isolate culture as the factor determining people’s saving habits.  
  • To study the relevance of cultural norms on saving behaviour the researchers linked each immigrant to the saving rates from their country of origin. They used a measure of savings rate over GDP, calculated from 1990 until 2010 as a proxy for culture. The researchers attributed the association found in their data between the behaviour of immigrants and the saving rate in the country of origin to differences in cultural beliefs across immigrant groups. Data on saving rates is taken from the World Bank’s World Development Indicators. Gross domestic savings are calculated as GDP less final consumption expenditures (ie: total consumption).