This paper argues that the typical household's saving behavior is better described by a "buffer-stock" version of the Life Cycle/Permanent Income Hypothesis (LC/PIH) model rather than the traditional LC/PIH model. In the buffer-stock model, consumers with significant income uncertainty are both prudent and impatient. Prudence leads them to save to smooth consumption over time, while impatience drives them to save more if future income is certain. This model can explain three empirical puzzles: the "consumption/income parallel," the "consumption/income divergence," and the temporal stability of the household age/wealth profile despite unpredictable wealth changes. The paper introduces the buffer-stock model and compares it to the standard LC/PIH model. It shows that the buffer-stock model predicts higher marginal propensities to consume out of transitory income, a higher effective discount rate for future labor income, and a positive correlation between saving and expected labor income growth. The finite-horizon version of the buffer-stock model, calibrated to U.S. household data, generates behavior that fits these stylized facts better than the standard LC/PIH model. The paper also discusses the implications of the buffer-stock model for empirical research, arguing that typical methods of Euler equation estimation, which assume a constant or zero variance term in the Euler equation, yield meaningless results if the consumers are buffer-stock savers. The buffer-stock model provides a more accurate framework for understanding household saving behavior and can explain the observed patterns of wealth accumulation over the lifetime.This paper argues that the typical household's saving behavior is better described by a "buffer-stock" version of the Life Cycle/Permanent Income Hypothesis (LC/PIH) model rather than the traditional LC/PIH model. In the buffer-stock model, consumers with significant income uncertainty are both prudent and impatient. Prudence leads them to save to smooth consumption over time, while impatience drives them to save more if future income is certain. This model can explain three empirical puzzles: the "consumption/income parallel," the "consumption/income divergence," and the temporal stability of the household age/wealth profile despite unpredictable wealth changes. The paper introduces the buffer-stock model and compares it to the standard LC/PIH model. It shows that the buffer-stock model predicts higher marginal propensities to consume out of transitory income, a higher effective discount rate for future labor income, and a positive correlation between saving and expected labor income growth. The finite-horizon version of the buffer-stock model, calibrated to U.S. household data, generates behavior that fits these stylized facts better than the standard LC/PIH model. The paper also discusses the implications of the buffer-stock model for empirical research, arguing that typical methods of Euler equation estimation, which assume a constant or zero variance term in the Euler equation, yield meaningless results if the consumers are buffer-stock savers. The buffer-stock model provides a more accurate framework for understanding household saving behavior and can explain the observed patterns of wealth accumulation over the lifetime.