How much of human behavior is determined by what’s in our genes? Surprisingly, a great deal when it comes to spending and saving patterns, says Stephan Siegel, assistant professor at the University of Washington, Foster School of Business in Seattle.
Genetics, he says, is the single greatest determinant of an individual’s propensity to either save or spend. While there is ample research to underscore the impact of learned behavior—what individuals acquire from their parents and through their experiences in life—on people’s financial decisions, what’s instinctive is actually more important and powerful in determining how individuals save and spend.
“Society is moving more and more toward defined-contribution plans, both at the governmental and corporate level, and the responsibility to save is clearly on the individual,” Siegel says. “The question of what determines people’s saving behavior is therefore extremely important to policymakers, financial firms and finance professionals.”
Siegel, along with Henrik Cronqvist, a professor at Claremont McKenna College in Claremont, Calif., conducted an empirical study of the variations in savings behavior across individuals by examining the gene-environment interplay on 15,000 sets of Swedish twins. They studied identical twins (twins sharing 100% of the same genes); fraternal twins (where 50% of the genes are shared); twins who grew up in the same family and shared a common environment; and twins in non-shared environments.
The results of their study—presented in a 2010 paper entitled “The Origins of Saving Behavior”—showed that people are actually born to be either savers or spenders, and not much can be done to change that. One-third of saving or spending behavior is the result of a person’s genetic makeup, the research showed. Indeed, identical twins exhibited the same spending and saving patterns, even if they had grown up apart.
Of course, the strength of genetic predisposition doesn’t mean that the environment that surrounds people and the various forces that constitute that environment—parental influence, peers and life experience—don’t impact an individual’s savings behavior. Socialization does play a role, Siegel says, but its impact actually disappears over time so that, eventually, the innate is what prevails.