Saving for the future: Dynamic effects of time horizon

Why is the public so underprepared for retirement? We studied the saving behavior of a large cross-section of adults to investigate age differences in motivations to save across adulthood. Our investigation revealed that both a future oriented mindset as well as adequate financial knowledge may be necessary for younger adults to engage in saving for their retirement. This finding is consistent with a theoretical account in which younger adults who have long time horizons prioritize preparatory goals and knowledge seeking. As time horizons shorten, motivations to realize goals replace motivations to gather knowledge. Accordingly, future oriented attitudes were more directly associated with saving with advancing age, such that future oriented adults who were approaching retirement saved regardless of their level of financial knowledge. Our findings reveal a dynamic character of saving tendencies across adulthood and imply age differences in the psychological factors that motivate saving behavior.