Environmental Instability and Psychological Time Horizons Predict Saving Behaviors

Most American households fail to effectively accumulate wealth long-term, and existing economic theories fail to fully explain why. Wealth accumulation requires consistent saving and investment behaviors and thus relies on the tendency to plan and act long-term. This tendency, in turn, hinges on the propensity to forego immediate rewards for the sake of future rewards. Synthesizing insights from economics and evolutionary psychology, the current work explores economic time horizons – a cognitive variable theorized to be shaped by levels of unpredictability in the immediate environment – and relates them to goal setting, financial planning, and saving behaviors. In a sample of 590 Americans and 1,097 people residing in another 13 countries, we find that income instability, shorter life expectancy, nation-level economic volatility, and focus on shorter-term life goals all predict lower proportion of savings; notably, these relationships hold after controlling for income size and financial literacy. The current work is among the first to examine long-term economic planning and behavior in relation to the level of risk and unpredictability in people’s local ecologies – a link that may be both economically rational and biologically adaptive.