Financial Fragility during the COVID-19 Pandemic

Clark, Robert L.; Lusardi, Annamaria; Mitchell, Olivia S.

doi:10.1257/pandp.20211000

Cited by 66 publications

(76 citation statements)

References 4 publications

(5 reference statements)

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“…Our paper also points to the key role of financial education, as a change in financial behavior can improve financial well-being of individuals [ 65 ], and financial capability has been shown to be directly related to psychological health, beyond income [ 66 ]. Relatedly, a study in the US shows that early in the COVID-19 pandemic the more financially literate people were better able to handle mid-size emergency expenses, indicating knowledge can provide some additional protection during a pandemic [ 67 ]. As noted in our study, heavily indebted households suffer directly and indirectly (through conflict) a worsening in their mental health.…”

Section: Discussionmentioning

confidence: 99%

Financial Distress and Psychological Well-Being During the COVID-19 Pandemic

Borrescio-Higa

Droller²,

Valenzuela

2022

Int J Public Health

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Objective: We examine the impact of financial distress caused by the COVID-19 pandemic on mental health and psychological well-being.Methods: We analyze cross-sectional survey data (n = 2,545) from the Life during Pandemic study in Chile. We estimate linear probability models to analyze the relationship between economic fragility, financial distress, and psychological well-being.Results: Our findings show unemployment and income loss are highly predictive of experiencing a range of financial problems, such as a lack of savings, as well as difficulties paying bills, consumer debt, and mortgage loans. In turn, financial distress leads to a higher prevalence of poor well-being and mental health deterioration, and sleep problems.Conclusion: Expansion of mental health assistance services are needed, as new diagnosis of mental health conditions has increased, but treatment has not, pointing to a barrier in the access to some mental health care services during the pandemic. Policies designed with the objective of improving financial education are necessary to increase precautionary savings and financial resilience, and alleviate the psychological burden of debt in the future.

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Section: Discussionmentioning

confidence: 99%

Financial Distress and Psychological Well-Being During the COVID-19 Pandemic

Borrescio-Higa

Droller²,

Valenzuela

2022

Int J Public Health

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“…The literature has provided strong evidence that higher levels of financial knowledge are associated with more sustainable financial behaviors and higher levels of financial health [1][2][3][4][5][6]. As observed by van Raaij [7], responsible financial behaviors improve personal financial well-being: individuals with responsible financial behavior are less likely to have financial problems, such as over-indebtedness, financial anxiety, and fragility, and to be exposed to investment fraud.…”

Section: Introductionmentioning

confidence: 99%

“…The determinants of preferring ethical financial companies: Average marginal effects.Notes: The table reports the average marginal effects on the probability of preferring socially and environmentally responsible financial companies, estimated from standard and endogenous probit models. Estimated average marginal effects on the number of correct answers to financial knowledge questions are also reported in columns (3) and(6). All the regressions include macro area and municipality size dummies.…”

mentioning

confidence: 99%

Financial Knowledge, Confidence, and Sustainable Financial Behavior

Aristei

Gallo

2021

Sustainability

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This paper analyzes the effect of financial knowledge and confidence in shaping individual investment choices, sustainable debt behavior, and preferences for socially and environmentally responsible financial companies. Exploiting data from the “Italian Literacy and Financial Competence Survey” (IACOFI) carried out by the Bank of Italy in early 2020, we address potential endogeneity concerns in order to investigate the causal effect of objective financial knowledge on individual financial behaviors. To this aim, we perform endogenous probit regressions, using the respondent’s long-term planning attitude, the use of information and communication technology devices, and the financial knowledge of peers as additional instrumental variables. Our main empirical findings show that objective financial knowledge exerts a positive and significant effect on financial market participation and preferences for ethical financial companies. Moreover, we provide strong empirical evidence about the role of confidence biases on individual financial behaviors. In particular, overconfident individuals display a higher probability of making financial investments, experiencing losses due to investment fraud, and being over-indebted. Conversely, underconfident individuals exhibit suboptimal investment choices, but are less likely to engage in risky financial behaviors.

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“…Overseas evidence suggests that older people are disproportionately vulnerable to the consequences of financial crises, especially those with limited incomes, pensions or superannuation funds, inadequate health care or who are dependent on market‐linked investments. 1 , 2 , 3 , 4 Financial well‐being (i.e. when a person can meet their expenses and has some money left over, is in control of their finances and feels financially secure, now and in the future) is considered important for providing older people with a sense of security and the freedom to make choices without stress.…”

Section: Introductionmentioning

confidence: 99%

COVID‐19: Financial well‐being of older Australians in times of crisis

et al. 2022

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Objective The aim of the present study was to explore the impact of the COVID‐19 pandemic on the financial well‐being of older Australian retirees. Methods Thirty Australian retirees (16 females and 14 males), older than 65 years of age, were asked ‘Have your finances been affected by the events surrounding COVID‐19?’. Data were analysed using Braun and Clarke's six‐step approach, and Bronfenbrenner’s socio‐ecological model was utilised to analyse thematic responses at individual, household, community and societal levels. Results Two COVID‐19‐related themes emerged from interviews: COVID‐19 and increased financial stress and COVID‐19 and frustration with digital banking. Conclusions This study revealed that the financial well‐being of older Australians and especially self‐funded retirees has been negatively impacted by the COVID‐19 pandemic. Participants felt financially worse off primarily due to the volatility of the financial markets, the need to support adult children and the increased cost of living. Also, participants expressed their hesitation and frustration with digital banking services, and their desire for greater personal contact with financial institutions, particularly during times of uncertainty.

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Financial Fragility during the COVID-19 Pandemic

Cited by 66 publications

References 4 publications

Financial Distress and Psychological Well-Being During the COVID-19 Pandemic

Financial Distress and Psychological Well-Being During the COVID-19 Pandemic

Financial Knowledge, Confidence, and Sustainable Financial Behavior

COVID‐19: Financial well‐being of older Australians in times of crisis

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