Households’ Financial Resilience, Risk Perceptions, and Financial Literacy – Evidence From a Survey Experiment

We examine the financial resilience of Austrian households, relating it to their experience of financial shocks earlier in life and to their financial literacy. We find that previous negative (positive) financial shocks are negatively (positively) related to financial resilience. Financial literacy and households’ financial resilience are positively related. Based on a randomized survey experiment, we investigate the role of over-optimism when evaluating the potential impact of future events on households’ financial situation. Households are asked to assess specific risks for their own household (treatment) or for a household with similar characteristics (control). On average, households assign a lower probability to shocks that negatively affect personal finances if asked for their own household compared to a similar household. We do not find the reverse effect for positive shocks. We find a negative correlation between over-optimism and financial literacy, indicating that financial literacy is relevant to both, financial behavior and the ability to assess financial shocks.

Bucher-Koenen, Tabea, Pirmin Fessler and Maria Silgoner (2023), Households’ Financial Resilience, Risk Perceptions, and Financial Literacy – Evidence From a Survey Experiment, ZEW Discussion Paper No. 23-074, Mannheim.