Financial management in long-term low-income households: comparing perspectives of professionals and families in Portugal

The design of housing solutions for low-income populations has been one of the most pressing policy concerns in developing countries like India. In this work, we explore the effect of risks confronting low-income households—unemployment, health and mortality—on their choice of housing arrangements. We use simulations to study the evolution of long-term wealth of a stylised low-income household faced with these risks and find that, on average, rental housing significantly reduces the risk of undesirable wealth fluctuations over time. From a policy perspective, this means greater focus and incentives for the development of low-income rental markets using strategies such as provision of rental vouchers, rent-to-own models or long-term leases, in addition to the traditional ownership-based housing strategies. The development of housing solutions encompassing a range of rental and ownership models will be critical to ensuring the availability of safe and affordable housing for all urban residents. JEL Codes: C63, O18

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Frugality Is Hard to Afford

Journal of Marketing Research ◽

10.1177/0022243718821660 ◽

2019 ◽

Vol 56 (1) ◽

pp. 1-17 ◽

Cited By ~ 7

Author(s):

A. Yeşim Orhun ◽

Mike Palazzolo

Keyword(s):

Low Income ◽

Financial Literacy ◽

Liquidity Constraints ◽

Good Deal ◽

Financial Resources ◽

Policy Makers ◽

Catch Up ◽

The Impact ◽

Low Income Households

Intertemporal savings strategies, such as bulk buying or accelerating purchase timing to take advantage of a good deal, provide long-term savings in exchange for an increase in immediate spending. Although households with limited financial resources stand to benefit the most from these strategies, they are less likely to make use of them. The authors provide causal evidence that liquidity constraints impede low-income households’ ability to use these strategies, above and beyond the impact of other constraints. Exploiting recurring variation in household liquidity, this study shows that when low-income households have more liquidity, they partially catch up to higher-income households’ ability to use intertemporal savings strategies. The findings provide guidance to marketing managers and researchers regarding targeted promotional design and measurement of deal-proneness. For policy makers, they suggest a new path for decreasing the higher prices low-income households have been documented to pay for everyday goods. Policies have traditionally focused on increasing financial literacy or access to supermarkets. Our work suggests that providing greater liquidity can help low-income households make better use of savings opportunities already available to them.

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Short Term and Long-Term Savings in Low Income Households: Evidence from Individual Development Accounts

Journal of Income Distribution ◽

10.25071/1874-6322.1309 ◽

2005 ◽

Author(s):

Margaret S. Sherraden ◽

Amanda Moore McBride ◽

Stacie Hanson ◽

Lissa Johnson

Keyword(s):

Low Income ◽

Well Being ◽

Economic Effects ◽

Individual Development ◽

Future Research ◽

Marginal Effect ◽

Individual Development Accounts ◽

Short Term ◽

Low Income Households

Previous research has found that individuals frame savings for short-term and long-term uses. These findings are reinforced through in-depth interviews with 59 participants and 25 controls in an experiment testing the effects of Individual Development Accounts (IDAs). All respondents are from low-income households. IDA participants appear more likely than control respondents to earmark savings for long-term purposes and asset investments. This could be interpreted as a result of the institutional saving structure provided through the IDA program. IDA participants are presented with savings goals, which they believe are made attainable through conveyed expectations, matching funds, financial information, and staff facilitation. Interviews suggest that savings may lead to psychological, behavioral, and economic effects. Future research can explore the distinct and marginal effect that each institutional dimension has on savings over the long term and the effects of savings on family well being.

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