Monday, February 4, 2013

When kids are impatient: subsidize their savings

I do not have scientific evidence for that, but my observation is that children are very impatient, and they become more patient with age. That is rather paradoxical, as children have all their life to do things, while older people have a shorter horizon. Maybe patience is acquired, and the environment you live in conditions you to learn about patience. Some may call this learning to control deep instincts.

Nicola Pavoni and Hakki Yazici assumes that people have self-control issues regarding impatience, and that these issues vanish with age. Then how can one get the efficient allocation of savings through the life cycle? It should be no surprise that this comes with subsidies for savings, and those decrease with age. I would add that if savings is learned from experience, then the subsidy would be even higher very early on. And this is already happening, with banks offering to children savings accounts with particularly high interest rates.

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