Behavioral Biases and Household Saving Decisions

Abstract

Household saving behavior often deviates from classical economic predictions due to behavioral biases. This study investigates how present bias, loss aversion, and mental accounting affect saving and investment decisions among 3,000 households in the United States and Germany. Survey and experimental data indicate that households with strong present bias tend to under-save, while those influenced by mental accounting allocate resources inefficiently across savings goals. Policy interventions such as automatic savings schemes, financial literacy programs, and nudges are recommended to enhance long-term financial security. The findings contribute to the understanding of behavioral economics applications in personal finance and policy design.