Skating on Thin Ice: New Evidence on Financial Fragility
34 Pages Posted: 5 Feb 2020
Date Written: January 24, 2020
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: Suggested Citation