One might wonder why anyone would borrow money if he or she had sufficient savings.
A new study at the U probes the reasons why people would engage in this seemingly contradictory behavior.
The study was conducted by associate instructor Heather Spencer of family and consumer studies, as part of her master’s thesis, and Jessie Fan, associate professor in the same department.
More than half of American households engage in simultaneous saving and borrowing.
The desire to have an emergency fund, investment reasons, saving for a down payment, the desire for self-reliance and the desire to have money to leave to one’s children were all factors contributing to why the majority of U.S. households borrow and save money simultaneously, according to the study.
The data for the study came from the 1995 Survey of Consumer Finances.
Of the respondents, 1,434 were those who had savings and no debt except a mortgage, 388 had debt but no savings, except checking accounts and forced retirement accounts, and 2,200 were simultaneously borrowing and saving money.
“Not much has been done in this area. We found no other study,” said Fan, who has been doing research on consumer behavior for 10 years.
Fan says this information is helpful to financial planners who need to understand the factors which influence the saving and borrowing of money.
Bryan Wilson, a U senior studying graphic design, has a part-time job in order to pay for school.
“All my friends that have loans have enormous amounts to pay back. It becomes a staple. I’ve stayed away,” he said.