How do we value our income from which we save?

In this paper we analyze the relationship between the perception of income as satisfying household needs and saving rate of this household. Using the multinomial logit regression function we measure the probability of a household to fall into one of the groups categorized by the subjective perception of income in relation to the current household disposable income. The variable specified for the valuation of income is income perception, defined as a class of observed disposable income located on the scale of the subjectively satisfying income. Factors determining the perception of income are: gender and education of the household head, family characteristics, source of income and place of residence. The analysis of relations between the income perception and the household saving rates shows that the perception of income affects both the household observed and predicted saving rates. The research is based on the Household Budget Surveys data for Poland in 2008.