Life Cycle Theory of Savings

The Life Cycle Theory of Savings describes how a person’s spending and savings habits may change over the course of his or her lifetime.

As kids, we might earn a little pocket money or receive an allowance. But as we age and gain more experience, our income typically increases until we reach retirement. Similarly, we may spend less when we’re younger, increase spending during our prime working years, and then become more conservative again in retirement.

How does your income affect your spending and savings habits over time? Although every case is different, we'll cover some common patterns in this video.