Demography and Savings: Evidence from a Russian Household Survey
Evguenia Bessonova, Irina Denisova, Nadezhda Ivanova, Alexandra Moskaleva
Household savings are important for sustainable development as they provide funds to finance investments. Recent demographic trends, and population ageing in particular, again attract attention to the amount, structure and determinants of household savings. On top of the ageing, the demographics of a household have changed notably. In particular, the share of single-person households has been rising, just as that of female-headed households.
The rise in single-person households is a common pattern in developed countries. This trend is observed in Russia as well. The research based on the latest population census shows that households are becoming smaller (two-thirds consist of one or two members), while the proportion of single households increased from 25.7% in 2010 to 41.8% in 2021. Over 2021, single-person households in urban areas in Russia became the predominant household type among the working-age population.
This study, based on survey data, attempts to trace how recent demographic changes have been shaping the saving behaviour of Russian households with a focus on single and female-headed households and the underlying mechanisms. We utilise data from the biennial longitudinal survey Financial Behaviour of Russian Households (rounds
Theoretical studies suggest that the propensity to save in families and single households will differ, since the partner’s income in a family can be considered as insurance in case of an unfavourable situation in the labour market.
Research based on survey data in other countries shows that female-headed households are less likely to save and tend to save less than male-headed households. The researchers explain this phenomenon differently. Some find that it is associated with economic factors since women’s incomes are consistently smaller than men’s incomes and, therefore, the ability to save is lower. Recent studies point to an equally important role played by traditions of financial decision-making in a particular family and psychological factors.
The Russian economy and demographics exhibit similar trends and have their own specifics, which may influence households’ saving behaviour. A high rate of female labour-force participation has been a long-standing trend in Russia, partially formed in the days of the Soviet Union. Therefore, the difference in saving behaviour between men and women, attributed to traditional roles in financial decision-making, may not be as pronounced as in other countries. Since a large group of the population has low incomes, the ability to save of a significant proportion of households is lower, regardless of marital status. On the other hand, low pension levels relative to working-age incomes create strong incentives to save. In addition, a high male mortality in working ages leads to a greater vulnerability of single women in older ages if they have no savings.
Our analysis shows that the demographic characteristics of households, as well as individual time and risk preferences of the household head have a consistently significant impact on how likely households are to form savings (any savings in general and savings sufficient for several months or longer) and that, along with economic factors, including such obvious ones as the income level, can determine households’ financial behaviour in the future.
We find that female-headed households save consistently less often, and this effect is primarily accounted for by households where the head is aged over 40. Furthermore, the peaks in the distribution of the probability of saving in male- and female-headed households do not coincide. The peaks for female-headed households are shifted closer to retirement age, which might be because of smaller incomes during working age and, accordingly, a lower ability to save.
Another conclusion is that single-person households are significantly less likely to save than other types of households. This finding is inconsistent with the theoretical models predicting that single households are more likely to save due to their greater exposure to income fluctuations compared to married couples. However, our conclusion is very robust to different model specifications. This finding is associated with two trends. The first one is the saving behaviour of middle-aged single men who tend to save notably less frequently than any other types of households. The second trend is due to single female households of older ages (more than 40) as the gap in the probabilities of saving between this group and other types of households begins to expand.
As our sample mostly comprises low- and middle-income groups (relative to the entire Russian population), a lower likelihood of having savings among singles compared to joint households with similar income levels can be explained by the fact that singles cannot utilise economies of scale in expenditures for basic necessities, such as housing rents and utilities, and for durable goods.
Since the demographic trends demonstrate a rising percentage of single households, behaviour patterns in this group may increasingly determine the saving behaviour of the population in the long term. Moreover, our analysis shows that the impact of individual time and risk preferences on saving behaviour in the group of single households differs from the estimated effects for other types of households.
Thus, individual preferences regarding the planning horizon substantially affect saving decisions among single men. High future discounting reduces the likelihood of savings more strongly for single men compared to single female households. Single women who are less risk-averse differ in their saving behaviour from other types of households.
Hence, for single-person households, whose share in the population has been increasing, probabilities of saving demonstrate a stronger dependence on individual time and risk preferences. Accordingly, as the demographic composition of the population changes, the influence of purely economic factors on households’ saving behaviour might decrease somewhat in the future. Single-person households have significant heterogeneity in the characteristics of their individual preferences. Therefore, financial market participants might need to tailor saving instruments for them to take into account an increasing proportion of single households with high risk aversion and a short planning horizon. In the near future, standard policies to encourage savings may become less effective, while the design of monetary policy may have to deal with a greater share of single households who are less likely to make savings. In turn, this may become one of the factors determining a higher level of the long-term equilibrium interest rate.
In addition, the well-being of female-headed and single-person households, especially in low- and middle-income groups, turns out to be particularly vulnerable to negative income fluctuations, as long as households with little or no savings actually lack any buffers in case their financial situation worsens. Negative income shocks can be most severe for households that, on top of little or no savings, have liabilities in the form of loans from banks or microfinance institutions — those households may face the difficult dilemma of either servicing the debt with lower incomes or going into personal bankruptcy.