Whether you should spend or save will depend not just on your time preference, but on the interest you can get when putting your money in a savings account. Suppose you have the option of spending $wnow or saving it until next year. If you save it, the bank will pay you interest ratei.

Suppose that your utility function is u(x)= . What does your discount factor need to be for you to be indifferent between spending it now and saving it?