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

Cziriak, Marius

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URN: urn:nbn:de:bsz:180-madoc-643082
Document Type: Working paper
Year of publication: 2022
The title of a journal, publication series: ZEW Discussion Papers
Volume: 22-070
Place of publication: Mannheim
Publication language: English
Institution: Außerfakultäre Einrichtungen > Graduate School of Economic and Social Sciences- CDSS (Social Sciences)
Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D14 , D91 , G51 , G53 , I18,
Keywords (English): 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

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