Saving and Life Insurance Holdings at Boston University – A Unique Case Study

This paper studies savings and life insurance adequacy using a financial planning software package, ESPlanner. This program computes the highest sustainable living standard for the household based on an elaborated life cycle planning model. ESPlanner was used in financial planning sessions with 386 Boston University employees. The sessions solicited highly detailed and very reliable information about respondents' financial circumstances and financial plans. The findings are striking. The correlation between ESPlanner's saving and insurance prescriptions and the actual decisions being made by BU employees is very weak in the case of saving and essentially zero in the case of life insurance. Many employees are spending far more and saving far less than they should, while others are under-spending and over-saving.