REVIEW OF RESEARCHED LITERATURE

Foreign Studies

According to research conducted in Georgia by Act Research (2011), 23% of the respondents

indicated that they save money and they have functional saving pan, while 49% do not save at all. The

same research reveals that 74% of the respondents save money when the need to save arises, 57% are o

the opined that large poor o expenditure prevented them from saving money. 35% indicated that with

increase in income their needs and desires will also increase which will make them spend more thereby

reducing the chances of saving. 22% said they prefer spend what they have today as they don’t know what

will happened tomorrow. 18% are o the opinion that they simply like spending than saving.

A research conducted by Atri (2012) revealed that the respondents opted for sending money than

saving it. The research findings of Keycorp (2005) revealed that 55% of the respondents save money.

Meredith (2009) found that the respondents save money for three reasons: to buy cloths, to go school and

to buy car. Word bank (1995) report indicated that only 13% of people in developing countries are saving

money. Bime and Mbanasor (2011) in their research found reasons why people do save money. The

findings indicated that the 14% respondents are saving money because they want to minimize their rate of

spending, 23% save because o precautionary motives, 19% save or security purposes, while 44% save

because of high rate of internets involved in taking loan.

In a study carried out by Chowa, Masa and Ansong (2012) in Uganda found that 63.78% have

positive attitude towards saving. 4.6% save because of se control, 53% save because of future expectations

of economic conditions.
3.79% save because it provides social support or them in their societies. Another study conducted by

Balint and Horvathne (2013) in Turkey shows that 46% of the respondents are engage in saving. The

results revealed that that there are three reasons why the respondents save money: for investment or any

other thing.

Saving is defined as that part of disposable income which is not spent on consumption (Bime and

Mbanasor, 2011). According to Virani (2012) saving is scarifying the current consumption in order to

increase the living standard and fulfilling the daily requirements in future. Saving is an amount of

something such as time or money that you do not need to use or spend. It could be used for investment to

earn interest (profit) or be used to purchase assets such as buildings. Saving is related to deferring

consumption, which is done by the households (individuals), the firms and, the governments. When the

interest rate is high, the household will save more money in the bank where entrepreneurs can borrow

(Kanjanapon, 2004).

It is also observed at almost all the time that it is the household (individual) that saves most, but it

is the entrepreneur that invests and the investment of the entrepreneur is got from the saving of the

household (Balami, 2006). Since saving of the individual becomes the capital to be invested by the

entrepreneurs, the saving and investment habit of individuals go a long way in affecting their chances and

the chances of other people to venture into entrepreneurship.

 Balami further states that it has been observed generally that rich men save more money than the

poor men. This is not only in amount but also in terms of proportion of income. The excess consumption

is drawn from their past savings or from debt. This was also confirmed by HILDA survey research

conducted in Australia, in which Kanjanapon (2004) found out that the likelihood to save increases with

the degree of perceived level of financial wellbeing. While 56% of young people who perceived

themselves as being prosperous or very comfortable saved regularly, only 21% of young people who said

they were poor or just getting along financially did so.

Unfortunately, with teenagers' low levels of financial literacy come irresponsible financial

behaviors. Fifty-six percent of teenagers consider themselves "spenders" rather than "savers" (NDSU

Extension Service, 2006). Additionally, 28% of students with a credit card do not repay the entire balance

every month (NDSU Extension Service, 2006). 10 A phone survey conducted by Merrill Lynch to 515

teenagers between the ages of 12 and 17 found that if teenagers are saving money, it is most often for

college or a car (2000). This survey also found that two-thirds of teenagers believe the best way to save

money is in a checking or savings account (Merrill Lynch, 2000). Teenagers who had a regular job were

more likely to have a checking or savings account (Merrill Lynch, 2000). Additionally, it was discovered

that teenagers who have been in classes that discussed savings and investing were more likely than those

who had not been in the class to seek savings and investing advice, and more likely to own stocks or

mutual funds (Merrill Lynch, 2000).

 Teenagers in today's marketplace have a tremendous amount of spending power (Pippidis, 2004).

Over 10 billion dollars were spent by teenagers on food and snacks for themselves in 2000 (Pippidis,

2004). Author Michael Wood is the Vice President of Teenage Research Unlimited, an organization which

has tracked teenager consumer behavior and attitudes for over twenty years (Wood, 2001). A survey

conducted by this organization on teenage spending behaviors was administered to over 2,000

respondents, ages 12 to 19 years old (Wood, 2001). In sum, teenagers in 2002 spent 155 billion dollars

which is up from 153 billion dollars in 1998 (Wood, 2001). On average, teenagers spent $84 per week in

2000 (Wood, 2001). Where is this large amount of money teenagers are spending coming from? Teenagers

get the majority of their money from adults, whether it is through allowance or gifts (Wood, 2001).

Another area of research that has particular relevance to this dissertation is the issue of saving

supports. Beverly and Sherraden (1999) hypothesized that institutions— formal and informal

socioeconomic relationships, rules, and incentives—influence saving. When testing the positive and

negative role of institutions in saving these can be called saving supports and saving barriers. Moore et al.

(2001) found several important findings when examining the perceived saving supports and barriers

experienced by savers. The researchers grouped the supports/barriers under different categories—social,

psychological, economic, and institutional. Supports included the specific features of the IDA themselves

such as, having a secure account (98 percent), having a match rate (95 percent), and adequate interest rate

(85 percent). Seventy percent reported that they had family and friends who encouraged them to save.

Participants also reported that economic circumstances negatively affected their ability to save. Eighty-

two percent agreed that most of their money went for necessities, and 55 percent reported that it was hard

to resist temptations to spend money.

 Of critical importance to this dissertation is the research that examines the issue of how people

save—specifically what saving strategies they use. As noted by Beverly et al. (2001, 2003), there are two

broad categories of strategies to set aside money: those used to find or create resources that may be

allocated to savings and those used to resist temptations to spend. Scholars have devoted some attention

to strategies used by low income households to set aside money for savings. There is some literature

regarding strategies used to cover infrequent or unanticipated expenses or to cope with budget shortfalls.

Though not directly linked to household saving efforts, this research helps identify how low-income

families try to make do on limited resources.

Research about strategies to cope with unexpected budget shortfalls is relevant to saving because

both actions require finding extra or creating new financial resources. Varcoe (1990) surveyed 934

households in California about the methods they used to meet unexpected expenses. Forty-four percent

used their regular savings, nearly 30 percent indicated that they did without new clothes or entertainment,

22 percent used emergency savings, 14 percent borrowed money from a bank or credit union, 11 percent

postponed paying bills, and 8 percent borrowed from family or friends. Rhine and Toussaint-Comeau

(1999) surveyed 194 middle-income households in Chicago and they found that in the previous five years

29 percent of the families had experienced a financial set back such as unemployment, large increases in

living expenses, death or illness of a family member.

To cope with these situations, 20 percent used existing savings, 16 percent asked family, friends, or social

organizations for money, 16 percent postponed paying bills, and 13 percent reduced consumption. In 1996,

Bond and Townsend surveyed 210 primarily Hispanic households in Chicago and found that 64 percent

experienced a financial setback within the previous five years. Multiple strategies were used by

households—59 percent used existing savings; 46 percent reduced consumption; 32 percent asked family,

friends, or social organizations for money; and 31 percent postponed paying bills.

Moore and colleagues conducted a cross-sectional survey of IDA participants to understand the

strategies that low-income people use to save money. The researchers found that the most common

strategies for saving money for IDA deposits were changes in consumption behavior—particularly using

existing resources more efficiently and reducing consumption quality or quantity. Seventy percent

shopped more carefully for food, 68 percent ate out less, and 64 percent spent less on leisure activities

(Moore et al., 2000).