How Inheritance Expectations Impact Household Savings

ABSTRACT This article examines how expecting to receive an inheritance impacts household savings. Life‐cycle consumption models indicate that the expectation of inheriting should reduce current savings for forward‐thinking consumers. We investigate this economic prediction, considering factors such as liquidity constraints and education. To do so, we use household fixed effects to account for time‐invariant factors and exploit within‐household variation over time by using the Japanese Panel Survey of Consumers (2003–2019), which provides individual‐level information and overcomes endogeneity concerns commonly present in cross‐sectional studies. Our findings reveal that households adjust their current savings in anticipation of receiving future inheritances. Specifically, men decrease their current savings by 5% if they expect to receive an inheritance in the future. Additionally, we find more pronounced changes among households with higher education and income levels. These findings inform inheritance fiscal policies, such as inheritance taxes, revealing that future inheritance expectations influence current savings decisions.