Time Preference

Abstract

Time preference is another basic concept in financial behavior, because many financial contracts such as mortgages, life insurance, and pension plans have a duration of 20–40 years. Saving and investing are financial behaviors directed toward the future. Some people are more present-time and others more future-time oriented. Time preference is the preference for spending now (present bias) or for saving for future spending (chapter 3) and for retirement (chapter 6). Time preference is also relevant for buying insurance (chapter 5) and for buying and selling stock (chapter 7). Future-time preference and procrastination (postponing tasks such as retirement saving) are related to self-regulation (chapter 17).