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

Marius Cziriak

No 22-070, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

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.

Keywords: financial fragility; financial literacy; personal finance; financial behavior; COVID-19 (search for similar items in EconPapers)
JEL-codes: D14 D91 G51 G53 I18 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:22070

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