The role of wealth components on savings across wealth levels : an analysis of Maltese households

Abstract

This dissertation examines the role of wealth components in influencing household-saving across different wealth levels in Malta. The study addresses a lacuna in existing literature by focusing on the distinct roles of real assets and net financial wealth on the saving ability of Maltese households. The researcher employs data from the 2014, 2017, and 2021 Household Finance and Consumption Survey waves. A two-part Logit model is developed to address the research questions. The first part establishes a relationship between net wealth and saving whilst the second part disaggregates net wealth into components to answer the primary research question of this dissertation. The findings reveal that both wealth components positively influence the household’s likelihood of saving, with real assets playing a more marked role. A meaningful increase in the odds of saving is observed with a €1,000-increase in real assets, while net financial wealth requires a substantially larger €100,000-increase to have a similar impact. Other noteworthy findings include that the odds of saving increases with a €10-increase in gross income. Households whose reference person attained tertiary education are more likely to save. Conversely, the odds of saving decrease for each additional household member or when the reference person is unemployed. The results carry important implications for policymakers aiming to enhance financial literacy and resilience among households through targeted saving programs. The findings suggest that households may benefit from prioritising the accumulation of real assets over net financial wealth. Future research could explore this phenomenon through a behavioural economics lens, examine the dynamics over time, and further disaggregate net financial wealth components.