This paper simulates a "buffer-stock" model of precautionary saving and estimates the parameters of the utility function by matching the simulated age-consumption profile with those observed in the micro-level data from the Family Income and Expenditure Survey (FIES) in Japan. Our empirical results show that with the high degree of patience (small subjective discount rate) and the low degree of risk aversion, about 40% of saving by young consumers is due to the precautionary motives.
