Understanding Overplacement in Risk Perception: Implications for Financial Resilience

This policy brief examines overplacement in households’ risk perceptions: overplacement describes the tendency of individuals to underestimate their likelihood of experiencing certain negative financial shocks compared to similar households. Using data from a randomized survey experiment, we find significant overplacement bias, especially for households with lower financial literacy. This bias can undermine crisis preparedness and lead to inadequate financial planning. Our findings also reveal that households with past experience of economic hardship show stronger risk awareness. These two findings underscore the critical role of both financial literacy and experience for building resilience. To mitigate overplacement and strengthen financial stability, we recommend targeted financial literacy programs focused on risk awareness, particularly for vulnerable groups, to help households build greater resilience against future economic hardship.

Bucher-Koenen, Tabea, Pirmin Fessler und Maria Silgoner (2025), Understanding Overplacement in Risk Perception: Implications for Financial Resilience, SUERF Policy Brief.