A Penny Saved is Not a Penny Earned: when Decisions to Earn and Save Compete for Consumer Resources

Policy makers, practitioners, and researchers emphasize the importance of consumers developing capabilities to improve their financial well-being. Key principles concern the management of two integral resources: earnings and savings. Although prior research has examined factors influencing those resources independently, less is known about how earn-save decisions are made in conjunction: for example, how people allocate hours in a day to activities aimed at learning how to increase earnings or savings. Thus, we examine how people think about and decide between opportunities to earn and save. In addition, we study whether perceived financial deprivation interacts with preferences for earning and saving opportunities. Four experiments show that (1) people prefer options to earn over options to save, despite believing that increases in earnings may not increase savings, (2) perceived financial deprivation heightens preferences for earning over saving, and (3) reframing saving options as earning options enhances preferences for saving among the financially deprived.