Het levenscyclusmodel van consumptie

The Life-Cycle Hypothesis or LCH, introduced by Franco Modigliani, explains how individuals strategically plan consumption and saving decisions over their entire lifetimes, rather than basing choices solely on current income.

According to the hypothesis, individuals aim to maintain stable consumption throughout their lives by adjusting their saving and spending behavior across different stages.

For instance, someone like Lisa may borrow during her early career when income is low, save significantly in her peak earning years, and later use these savings during retirement to support a consistent lifestyle.

Graphically, the LCH depicts lifetime income as a hump-shaped curve, rising sharply during middle age and declining afterward.

In contrast, consumption remains steady, supported initially by planned borrowing, then by planned saving, and finally by withdrawal from savings.

However, the hypothesis assumes that individuals make rational decisions and can accurately predict their lifespan, future income, inflation, and interest rates.

It also presumes unrestricted access to credit. Moreover, it largely overlooks unexpected economic or personal shocks.