Skating on Thin Ice: New Evidence on Financial Fragility

34 Pages Posted: 5 Feb 2020

See all articles by Jasmira Wiersma

Jasmira Wiersma

University of Groningen

Rob J. M. Alessie

University of Groningen; Netspar; Tilburg University - Center for Economic Research (CentER)

Adriaan Kalwij

Utrecht University

Annamaria Lusardi

George Washington University - Department of Accountancy; National Bureau of Economic Research (NBER)

Maarten van Rooij

De Nederlandsche Bank; Netspar

Date Written: January 24, 2020

Abstract

This paper analyzes the financial fragility of Dutch households by examining their ability to raise 2,000 euro within a month in case of a financial emergency. Using data from a survey module fielded in 2016 in the CentERpanel, we document that one in seven Dutch households is financially fragile. Moreover, some demographic groups, specifically females, single person households, renters, low-income households, the lower educated and the unemployed are more likely to be financially fragile. While a majority of households would use their savings to cope with a financial emergency, a noticeable fraction of households would resort to other methods, such as relying on family and friends or borrowing using credit cards. Financial literacy, confidence in financially literacy skills and probability numeracy are all associated with financial fragility as well as with the methods people use to cope with an emergency. These results support previous findings on the importance of financial knowledge and numerical ability for financial decision making.

Keywords: financial fragility, financial literacy, probability numeracy, personal finance, financial behavior

JEL Classification: D14, D91

Suggested Citation

Wiersma, Jasmira and Alessie, Rob J. M. and Kalwij, Adriaan and Lusardi, Annamaria and van Rooij, Maarten, Skating on Thin Ice: New Evidence on Financial Fragility (January 24, 2020). De Nederlandsche Bank Working Paper No. 670, January 2020, Available at SSRN: https://ssrn.com/abstract=3531017 or http://dx.doi.org/10.2139/ssrn.3531017

Jasmira Wiersma

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen, Groningen 9700 AV
Netherlands

Rob J. M. Alessie

University of Groningen ( email )

P.O. box 800
9700 AV Groningen
Netherlands
050-3637240 (Phone)

HOME PAGE: http://members.chello.nl/~r.j.m.alessie

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.netspar.nl

Tilburg University - Center for Economic Research (CentER)

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Adriaan Kalwij

Utrecht University ( email )

Janskerkhof 12
Utrecht, 3512 BL
Netherlands

Annamaria Lusardi

George Washington University - Department of Accountancy ( email )

George Washington University School of Business
Washington, DC 20052
United States

HOME PAGE: http://business.gwu.edu/profiles/annamaria-lusardi/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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