To save or not to save: the role of personality traits and cognitive ability on household savings behavior in Indonesia

Why do two households with the same income and characteristics may have different sav-ings? In particular, this is where it is considered that the willingness to save (which is impacted by psychological variables) may play a role. In this regard, the objectives of this study are to investigate the effect of psychological factors on household savings, as well as the effect of those factors via intra-household decision-making channel. The motivation for this research stems from the fact that Indonesian households have relatively low level of savings and fi-nancial resilience, as well as the condition that household savings remain important. Further, the findings show that conscientiousness, neuroticism, cognitive ability, risk and time pref-erences are the psychological factors that influence household savings. Meanwhile, in the indirect channel, conscientiousness, neuroticism, extraversion, and cognitive ability also in-fluence the involvement in the savings decision-making process. In addition to the four fac-tors, agreeableness and time preference also affect household decision-making types. More-over, the results demonstrate that concerning the role of the decision-making types on household savings, when husbands have a large role in monthly savings, overall household savings tend to be higher.