Which of the following is an example of the precautionary motive for saving?
A) Pat puts $400 per month in his 401(k) retirement account.
B) Jordan sets aside $200 per month in case she has to pay for a new roof for her house.
C) Gerry and Terry put $2,000,000 in a trust fund that will go to their children when they die.
D) Every month, Chris puts $400 into his saving account so that he can buy a new car in a few years.

Question

Quizplus · Accepted Answer

The precautionary motive for saving refers to setting aside money for unexpected expenses or emergencies. Jordan's decision to save $200 per month in case she needs to pay for a new roof falls under this category, making it the correct answer. Option A refers to saving for retirement, option C is estate planning, and option D is saving for a specific future expense, which do not fall under the precautionary motive for saving.

Which of the Following Is an Example of the Precautionary