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Is it rational for a person to not increase a savings rate over time that was...

Is it rational for a person to not increase a savings rate over time that was initially set too low? Why do people succumb to this irrational behavior?

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Answer #1

Economy is very dynamic in nature. Over the period of time there will be significant change in time value of money. .Thus a person has to design the rate of savings over years based on his incomes, his family status and society standards. It is not rational to keep the savings rate low as it will have a negative impact during contingency situation.

People succukb to this irrational behavior because eof lack of knowledge on social economical changes and the time value of.money. They are Keen to spend and to lead a life at maximum luxury they could . People are very much naive about the future demand or requirement of savings

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