Saving among Low-income Women: Motivation and Obstacles

This paper uses data from interviews with 51 low-income households in Detroit to understand their perceptions and motives for saving as well as the obstacles they face. The study finds that households wish to save, and plan to do so in the future when they hope to have more income. Study results indicate that:

• Households motives for saving include building a cushion in case of unexpected events, putting their children through college, buying a house or car;
• Some view savings as complementary to retirement saving, since they plan to supplement their retirement income by running a small business;
• Most respondents save for retirement through inaccessible vehicles such as 401K plans and employer-provided pensions.

Finally, friends and family surface as major obstacles to saving, as those who have liquid assets are asked for help. Conversely, many respondents are beneficiaries of gifts or other support from friends and relatives. These complicated patterns of resource-sharing have clear benefits for the low-income population overall, providing a mechanism for smoothing consumption analogous to consumption insurance in developing economies.