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Saving Motives Volume and composition of saving of individual households, business enterprises, and governments, and hence personal and national saving, are influenced consciously and unconsciously by motives very different in kind. Their identification and analysis is a matter for individual and mass psychology. In this section only a narrow group of motives can be discussed, however briefly, viz. the motives that are connected rationally with definite objectives of the saver. It must always be borne in mind that such rational considerations actually are applied by only a portion of savers, probably even by a minority. The rational motives of saving are basically of three types: (a) acquisition of certain durable tangible assets to be used in saver's household; (b) provision for certain future expenditures; and in cases where saver is, or intends to become, an independent businessman, farmer, or professional, (c) provision of an equity fired necessary to establish and maintain him in business. Objective (b) may in turn be particularized trader the headings of (i) funeral and related expenses--even in twentieth century America still one of the few contingencies for which most people of small means make conscious provision, (ii) maintenance of saver and dependents after retirement, (iii) estate of surviving spouse, children, and other dependents, (iv) specific anticipated expenditures of substantial size compared to current income, e.g. children's education, and (v) establishment of a reserve for undesignated contingencies, that is, a "rainy day." All these requirements are determined partly by objective factors; partly, like current consumption, by group standards; and partly by idiosyncrasies which have to be ignored here. Among the objective factors which may be presumed to have the greatest influence on rational requirements for saving are length of working life and retirement (so far as they lie outside the saver's individual decision), yields obtainable on different forms of saving, level of income, movements of cost of living, availability of insurance against certain contingencies such as death or invalidism, cost of education and medical care, and minimum equity required for starting in a business or profession. Saving requirements determined or at least strongly influenced by group standards include, to mention only important ones, the desired relation of average real income during retirement and working life, the types and qualities of durable consumer goods regarded as part of the group standard of living, the value put upon home ownership, and--in the long run possibly of greatest influence--the relative attraction of hired employment and entrepreneurial status. The mere enumeration of the main factors which influence rational saving requirements indicates the complexity of the problem. Difficulties multiply when an effort is made to quantify these factors and to combine them in a formula which measures rational saving requirements. But even without taking such an ambitious approach it is evident that the required saving ratio (i.e. the ratio between required saving and income averaged for the saver's working life) will move in the same direction as the following factors, and will be the higher or lower the larger or smaller they are: (a) ratio of desired retirement income to average working life income, (b) ratio to average income of estate desired to be left to dependents at saver's death, (c) outlay for consumer durables required by custom, expressed as multiple of average income, and (d) length of retirement life. The required saving ratio, on the other hand, is inversely related to two important factors, i.e. it rises as they decline and falls as they increase: (e) yield on different forms of saving and (f) length of working life. During the fifty years since the turn of the century the length of the retirement period has shown a rising trend, reflecting earlier retirement as well as increased longevity; length of working life seems to have declined slightly for people living until retirement age; the cost of the customary complement of consumer durables has increased considerably in proportion to average income, chiefly as a result of the advent of the automobile; and the proportion of desired retirement income to average working life income has probably risen--all four factors calling for a rise in the required saving ratio. The downward movement of yields has worked in the same direction. The only factor that may have contributed to a reduction in the required ratio is a decline in desired estate (in relation to average income), a movement about which not much can be said with confidence, but which certainly cannot have been sufficient to counteract the factors which tend in the opposite direction. Thus, the conclusions--based in part on factors and quantitative considerations not specifically set forth--apparently must be that the required personal saving ratio has shown a tendency to increase during the last fifty years, and that the increase may have been substantial. These conclusions are borne out by the figures as far as saving through tangible assets used in consumer's household are concerned. Saving through intangible assets, however, which is designed to meet requirements of type (b) and which one would expect to have increased in relation to income, actually shows a decline, which is substantial if compulsory saving is excluded. This discrepancy may be explained by two developments. The first is entirely rational from the individual saver's point of view: The more specific contingencies are either covered by insurance or without direct cost to the saver by public bodies, the smaller the requirements for which the individual must provide by saving. The spread of private life insurance, private pension plans, federal old age insurance, federal and private sickness and invalid benefits, and governmental unemployment benefits all have tended to reduce the individual household's rational saving requirements. The second development, which must be surmised and cannot be documented, is less rational and less unequivocal--a feeling that the contingencies for which no explicit provision is made through insurance or public assistance and for which rationally specific provision would have to be made by saving will somehow be taken care of by public bodies, even though--and this is a consideration working in the opposite direction--much less reliance can now be placed in such contingencies on support from children, relatives, neighbors, or friends. The combination of objective factors and shifts in mass psychology thus appears to have led to four important changes in the motives behind personal saving: increased emphasis on saving in the form of durable tangible assets used in saver's household, i.e. home and consumer durables; reduced stress on individual provision for old age in favor of collective arrangements; considerably less accent on leaving a substantial estate--a possibility at any time and in any country open only to a minority of the nonagricultural population; and the necessity of providing within a shorter working life for a substantially longer period of retirement.   Home