Saving for the Future: Trends, Patterns, and Decision-making Processes Among Young Americans

This dissertation explores financial decision-making and outcomes among young adults in the United States in order to inform policies that promote saving and financial security. The study presents a five-phase conceptual model of the financial decision-making process and describes the influence of individual-level and environmental factors. Following the model, three empirical studies are presented.;The first describes how financial portfolios have changed over the last five decades and finds that wealth, inequalities and financial risk have risen among young households. The study uses econometric techniques to estimate the effect on household wealth of changes in the socio-economic and demographic composition of the population since the 1960s and finds that the depressing effects of these trends are overwhelmed by market forces that inflated asset prices in recent years. The second empirical study applies statistical and network analysis techniques to describe patterns in financial portfolios, finding that young households accumulate financial accounts in a particular order in accordance with emergence of financial needs over the life course. Differences in account-holding across socio-economic groups manifest as different stages in a common progression of account acquisition, rather than divergent patterns in financial portfolio-building. The third empirical study describes the process by which young adults save for the future, using data collected from a series of semi-structured interviews. The findings validate the conceptual model of the financial decision-making process and describe how practical, cognitive and psychological resources affect choices at each phase.;Together, the findings of all three empirical studies suggest that despite large variations in outcome, the process by which young adults build their financial portfolios is largely the same. Individuals proceed through five phases of decision-making with respect to each financial need associated with five successive stages. Variations in financial portfolios can largely be explained by differences in progress along the same path, defined by the intersection of the five decision-making phases and the five financial need stages, rather than differing processes. The implication of this key finding is that numerous (i.e., twenty-five) junctures exist at which to influence financial decision-making in order to promote saving for the future. On this basis, the dissertation proposes a model to identify the range of policy options for various stakeholders to target the practical, cognitive and/or psychological factors that influence decision-making at each step in the wealth-building process.