Swedish household data point to a source of differences in wealth accumulation that is easy to overlook: how people weigh spending today against spending later. A study published in the Journal of Finance estimates that attitudes toward time vary more widely than willingness to take financial risks.
The research, published online on July 23 and discussed by SKEMA Business School on September 3, separates three preferences that are often bundled together when people talk about being cautious with money.
It offers economists a way to examine why households accumulate wealth at different speeds. The estimates come from a model fitted to financial records, so they should not be read as proof that people with less wealth are simply less patient.
Three preferences behind financial decisions
Risk aversion describes how uncomfortable someone is with uncertain outcomes. A household may accept a lower expected investment return in exchange for less uncertainty.
Time preference concerns the weight placed on consumption now compared with consumption later. In the model, a higher time preference rate means a stronger preference for the present.
The third measure, the elasticity of intertemporal substitution, describes willingness to move consumption between different periods when the reward for doing so changes. For example, a better return on saving alters the trade-off between buying something now and having more spending power later.
Patience and responsiveness are separate characteristics. Someone can place a high value on future spending while being relatively reluctant to adjust their current plans when incentives change.
The published study finds relatively modest variation in estimated risk aversion. Its time preference measure and willingness-to-shift-consumption measure are much more dispersed, with some particularly high estimates pulling up their averages.
What the Swedish records can reveal
Laurent E. Calvet of SKEMA, John Y. Campbell of Harvard University, Francisco Gomes of London Business School and Paolo Sodini of the Stockholm School of Economics conducted the research.
Their accessible working-paper version, revised in May 2025, describes a panel of 298,646 households observed from 1999 to 2007. The researchers organized the data into 4,264 groups using characteristics including age, education, employment-sector income risk and starting financial positions.
They fitted a life-cycle model, which follows saving, consumption and investment decisions as households grow older. Preferences were inferred from patterns in wealth and investment holdings, not measured through a questionnaire asking people how patient they felt.
Groups entering the sample with less wealth relative to income tended to have a higher estimated preference for present consumption and less willingness to shift consumption across time. In the model, higher time preference was associated with accumulating retirement savings later.
Low wealth has more than one explanation
Those relationships depend on the model’s assumptions and the households included. The sample focused on middle-aged households holding risky financial assets outside retirement accounts. It excluded the wealthiest 1% by initial financial wealth, along with other groups that did not meet the data requirements.
Young adults, households avoiding risky investments and people facing different tax or pension systems may behave differently. The records also predate today’s household finances by nearly two decades.
Income, unavoidable expenses, family circumstances and financial shocks constrain the money available to save. A household’s bank balance alone cannot reveal its preferences or explain how it arrived there.
Why a single incentive may produce different responses
For policymakers, the research raises a modeling problem: treating every household as having the same preferences can miss differences in how people respond to financial incentives.
Our earlier coverage of buy-now-pay-later pricing research examined another setting in which the timing of payments matters. That separate model concerned retail credit and prices, not the Swedish households studied here.
Financial protection also involves trade-offs. The authors argue that when preferences differ, restricting a product may protect some consumers while removing a choice that suits others. Assessing a rule then requires evidence about both consumer mistakes and the range of preferences it would affect.
