At present, China’s high-quality economic development needs to focus on expanding domestic demand, giving full play to the basic role of consumption and the key role of investment. However, China has long had a high household saving rate, which is not conducive to domestic demand growth. The emergence and development of digital finance have provided an effective way to reduce the household saving rate. Nevertheless, the existing literature is insufficient to investigate the mechanisms by which the development of digital finance affects household saving rates, and relevant empirical evidence is also lacking. This paper argues that the development of digital finance provides more ways and facilities for households to take risks and cope with uncertainty by providing more financing channels and lowering the financing threshold, which helps alleviate household liquidity constraints and thus reduces household saving rates, and this effect is more significant for households with stronger liquidity constraints (such as households with lower income and social capital and higher precautionary saving incentives). Using the data of China Household Finance Survey in 2013, 2015, and 2017 and the Peking University Digital Financial Inclusion Index at the city level in 2012, 2014, and 2016, the analysis found that: the improvement of urban digital finance development level had a significant negative impact on the household saving rate, in which the coverage breadth and use depth of digital finance had a significant effect, but the digitalization degree of inclusive finance had no significant effect; an increased level of urban digital financial development reduced the probability that households face liquidity constraints, and households facing liquidity constraints had higher saving rates. Thus, digital financial development can reduce household saving rates through the path of alleviating liquidity constraints; the negative impact of the development level of urban digital finance on the household saving rate had significant household heterogeneity, and the marginal impact on households with precautionary saving motivation, low-income households, and households with less social capital was greater, while the impact on households with very low saving rate (the lowest 20% of the sample households) was not significant. Compared with the existing literature, this paper mainly makes the following extensions and improvements. Firstly, it explores the impact of digital finance development on the household saving rate, expands the study of the economic effects of digital finance and the factors influencing the household saving rate, and provides an explanation for the declining trend of the saving rate in China. Secondly, multi-period household saving data and city-level digital financial inclusion index are used for the empirical test, which provides empirical evidence for the reduction effect of household saving rate and the path to ease liquidity constraints and household heterogeneity of digital financial development. This study shows that the development of digital finance can effectively reduce the household saving rate, release household consumption potential, and contribute to high-quality economic development and the formation of a new development pattern. The development of digital finance should be actively promoted, the breadth of coverage and depth of use of digital finance should be further improved, the incentive for households to save preventively should be reduced through multiple channels, the liquidity constraint of households with lower income and less social capital should be effectively alleviated, and the consumption growth of disadvantaged groups should be promoted.