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The Life-Cycle Theory of Savings, developed by economists Franco Modigliani and Richard Brumberg in the 1950s, posits that individuals plan their consumption and savings behavior over their lifetime to achieve a stable standard of living. According to this theory, people save during their working years to provide for retirement when their income typically decreases. The theory emphasizes the role of expected lifetime income rather than current income in determining savings behavior, suggesting that individuals will smooth consumption across different stages of life. Ultimately, it highlights the importance of long-term financial planning in Personal Finance.

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