Locus of Control and Saving: The Role of Saving Motives

Using data from a longitudinal survey representative of the Dutch population, we analyze the relationship between saving and locus of control, and we study the underlying mechanisms. Locus of control measures the extent to which individuals perceive their life outcomes to be determined by their own actions, as opposed to external factors. Those who believe to be in control of future outcomes turn out to save more, both at the extensive (decision to save) and intensive margins (amount saved). We investigate the mechanisms behind this relationship. We implement a mediation analysis to examine the role of saving motives, distinguishing between specific and non-specific purposes. The effect of external locus of control is direct, while the effect of internal locus of control is indirect, largely driven by (non-specific) saving motives.