Time Preference

Time preference is an economic concept describing how much people value having goods now versus the same goods in the future. All else equal, individuals generally prefer present consumption to delayed consumption a basket of goods available today is valued more highly than the identical basket a year from now. The strength of that preference varies between people and over time, and it is a foundational idea in Austrian economics developed by thinkers such as Eugen von Bohm-Bawerk.

High versus low time preference

Someone with a high time preference strongly favors immediate gratification and discounts the future steeply, tending to spend rather than save. Someone with a low time preference is more willing to defer consumption, save, and invest for later benefit. Neither is inherently "correct" the appropriate balance depends on circumstances but the concept helps explain saving, borrowing, and investment behavior across an economy.

Connection to interest rates and money

In the Austrian view, interest rates emerge naturally from the aggregate of individual time preferences: the premium people place on present goods over future goods. The framework is also used to discuss how the nature of money may influence saving behavior. Some argue that a money expected to hold or grow in purchasing power encourages lower time preference, though this is an interpretive claim rather than a settled empirical result.

Time preference connects savings decisions to the qualities people seek in a store of value, and it underlies disciplined accumulation strategies such as dollar-cost averaging. This entry is educational and does not advocate any particular saving rate.