Households' financial fragility during the COVID-19 pandemic in Germany

Cziriak, Marius

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URN:	urn:nbn:de:bsz:180-madoc-643082
Dokumenttyp:	Arbeitspapier
Erscheinungsjahr:	2022
Titel einer Zeitschrift oder einer Reihe:	ZEW Discussion Papers
Band/Volume:	22-070
Ort der Veröffentlichung:	Mannheim
Sprache der Veröffentlichung:	Englisch
Einrichtung:	Außerfakultäre Einrichtungen > GESS - CDSS (SOWI) Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC-Schriftenreihe:	Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Fachgebiet:	330 Wirtschaft
Fachklassifikation:	JEL: D14 , D91 , G51 , G53 , I18,
Freie Schlagwörter (Englisch):	financial fragility , financial literacy , personal finance , financial behavior , COVID-19
Abstract:	I examine the financial fragility of German households during the second wave of COVID-19 infections in the winter of 2020/21 by analyzing the households’ ability to come up with EUR 2,000 within one month. About one in three households reports being unable to cover an unexpected expense of EUR 2,000 within one month, with some subgroups being particularly at risk, including individuals with children, tenants, respondents without employment or in marginal employment, and with lower levels of income, wealth, or education. While most households have access to rainy day funds for financial emergencies, a noticeable fraction complements this with borrowing, relying on family and friends, or overdrawing their accounts. Households that experienced more severe income losses since the onset of the crisis are more likely to report being unable to cope with an unexpected expense and are more likely to complement their rainy day savings with funds from other sources. Notably, my findings underline that financial literacy may protect households’ financial capabilities in times of crisis: Financial literacy is associated with lower financial fragility and appears to mitigate the negative consequences of income losses on the ability to cope with emergency expenses