Revisiting precautionary saving under ambiguity

I study the two-period consumption-saving problem with non-separable utility under ambiguity. Under smooth ambiguity aversion, ambiguity and greater ambiguity aversion raise optimal saving. When relative prudence in ambiguity preferences does not exceed 2, agents who perceive greater ambiguity have a higher demand for saving. While a convex marginal ambiguity function is not sufficient for precautionary saving in time-separable models (Berger, 2014), I show that it is not even necessary in a time non-separable setting. •Precautionary saving under ambiguity with non-separable utility.•Ambiguity raises optimal saving for ambiguity-averse agents.•No restrictions on higher-order derivatives of ambiguity function required.•Increase in ambiguity aversion raises optimal saving.•Effect of change in belief depends on relative prudence in ambiguity preferences.