Small Business Owners Better Savers

Even though business owners are more likely than non-business owners to assume above-average risk for financial gain, they are generally more conservative when it comes to saving and borrowing, according to a new study from entrepreneurial advocacy group the Kauffman Foundation.

Nearly half (45%) of business owners and only 32 percent of non-business owners reported it was important to save for retirement, and business owners are much more likely to report that they are saving for longer time horizons. These results are consistent with findings from earlier literature that business owners have higher savings rates. The analysis also found that the more years a business has existed, the higher the owner’s wealth — each additional year of business ownership results in a $2,700-$3,000 increase in net worth.

The majority (91%) of business owners report shopping a moderate amount to find the best investment borrowing terms, while only 82 percent of non-business owners shop as much. In terms of borrowing practices, business owners appear slightly more conservative, with 47 percent reporting that it is OK to borrow for living expenses versus 52 percent for non-business owners.

"It appears that owners simply don’t believe their business ventures are all that risky," said Robert E. Litan, vice president of research and policy at the Kauffman Foundation.

"This result suggests that — as opposed to reducing other risks — the policies that will best encourage increased business ownership include those that allow entrepreneurs to determine their profitability, including increasing the transparency of the patent process and implementing less burdensome tax and regulation requirements."