Debt, Financial Vulnerability, and Repayment Behaviour in Older Canadian Households

Earlier research has documented that debt at older ages has increased significantly in Canada over the period from 1999 to 2016. In this article, we explore the consequences of a growing proportion of older Canadian households experiencing financial vulnerability. After controlling for household characteristics, we find among older households that a high debt-to-asset ratio and very low liquid wealth are significantly and positively associated with skipping or delaying a mortgage or non-mortgage debt payment and with usually paying the minimum amount or less on credit cards in the previous year. The debt-to-income ratio, however, is not an important indicator of financial vulnerability for older households.

Personal Credit and Financial Vulnerability

Rather than a narrow focus on risk of default, this paper advocates for lenders to take a broader data-led approach to tackling the challenges posed by financial vulnerability due to its latent and transient nature. Earlier identification and intervention when customers are experiencing financial hardship may help prevent default. Firstly, we consider how macro and micro data sources, in combination with emerging theoretical frameworks that conceptualise financial vulnerability, could be used by lenders for earlier identification of vulnerable customers. Secondly, we look at tailored interventions that could help financially vulnerable consumers once they have been identified, with passive and active methods inspired by protective efforts currently underway within the gambling industry. Lastly, when consumers do enter the arrears process, we highlight how lenders have a responsibility to help mitigate cognitive biases and promote behaviours that will help consumers escape perpetual debt.

Households' intentions under financial vulnerability conditions: is it likely for the COVID-19 pandemic to leave a permanent scar?

PurposeThe authors draw on psychological reactance theory, collective mental programming, psychological profiles and financial vulnerability experiences to assess the possibility that the pandemic may induce transformative changes in households' behavioral intentions related to financial decisions after the pandemic is over.Design/methodology/approachUsing a unique survey data drawn from four different countries located in North America, Europe, Africa and Latin America, the authors show that the stressful conditions that accompanied the pandemic have instigated a state of financial vulnerability and stimulated instinctual defensive mechanisms among consumers.FindingsThe study results indicate that households have intentions to make defensive decisions in spending, consumption, planning and investment. Furthermore, the authors report evidence that personal psychological heterogeneity (as an individual factor) and collective mental programming (as a cultural factor) play a significant role in shaping households' postpandemic financial intentions.Research limitations/implicationsThe study findings carry important practical implications. For financial institutions, marketers and financial advisors, the authors’ work implies that individual and collective factors affect people's perception and behavioral intentions in response to financial adversities. For social planners and legislators, the authors’ work shows that they should expect not only short-term but also long-term reactions to the COVID-19 pandemic.Originality/valueMost research on the impact of COVID-19 pandemic on households' financial behavior focuses on transitional adjustments made during the pandemic, and little emphasis has been placed on potential postpandemic adjustments. The authors contend that it would be a mistake to analyze the pandemic-induced crisis as a temporary financial hardship.

Resilience in Vulnerable Small and New Social Enterprises

The use of financial ratios in predicting financial vulnerability has a large body of literature, but few studies address resilience and the recovery from financial distress. Further, no vulnerability studies specifically address the needs of small and young social enterprises. This study uses over twenty years of panel data to predict which factors signal the future recovery of small and young social enterprises. There is mixed support for hypotheses found in the literature, and though additional equity and revenue diversification is shown to be beneficial, increased surplus ratios carry implications which vary between financial stressors. Even in a sample of small organizations, we find evidence for the liability of smallness. Implications for practitioners, researchers, and policymakers are discussed.

Perceived Financial Vulnerability Is Related to Perceived Cognitive Impairment and Living Alone

Objective Perceived financial vulnerability is linked to physical and mental health and also to risk for financial exploitation (Lichtenberg et al., 2020a,b). This study examined the relationship of risk scores for financial exploitation to demographic variables, perceived memory loss and living alone. Methods The 17-item self-report Financial Exploitation Vulnerability Scale (FEVS) posted on our website https://olderadultnestegg.com was completed by a convenience sample of 258 older adults. Correlational, multiple regression and Chi Square analyses were used. Results Thirty percent of the sample scored at an elevated risk for financial exploitation due to perceived financial vulnerability. Although this was a convenience sample the results were similar to what was found in a sub-study of the HRS. Thirty eight percent of participants were living alone and 38% reported that their memory was less reliable than a year ago. Financial vulnerability risk score was significantly related to decreased education (r=-.12), living alone (r=.21) and perceived memory loss (r=.35). Eighteen percent of the variance was accounted for in a multiple regression (F(5,250)=10.73, p<0.001, r2=0.18) with all three measures predicting FEVS risk score independently. The combination of perceived memory loss and living alone was significantly associated with the highest percentage of elevated risk scores. Discussion Perceived financial vulnerability and its relationship to health (e.g. memory loss) and financial exploitation, continues to be under-appreciated in gerontology and geriatrics research. Our findings, consistent with GSA's Longevity Fitness report further highlights this important dimension.

Living with Reduced Income: An Analysis of Household Financial Vulnerability Under COVID-19

The COVID-19 crisis has led to substantial reductions in earnings. We propose a new measure of financial vulnerability, computable through survey data, to determine whether households can withstand a certain income shock for a defined period of time. Using data from the ECB Household Finance and Consumption Survey (HFCS) we analyse financial vulnerability in seven EU countries. We find that, out of the 243 million individuals considered, 47 million are vulnerable to a three month long income shock (the average length of the first wave COVID-19 lockdown), i.e., they cannot afford food and housing expenses for three months without privately earned income. Differences across countries are stark. Individuals born outside the EU are especially likely to be vulnerable. Being younger, a single parent, and a woman are also statistically significant risk factors. Through a tax-benefit microsimulation exercise, we look into the COVID-19 employment protection benefits, the largest income support measure in the countries considered. Considering as our sample individuals in households where someone receives a salary, we derive household net income when employees are laid-off and awarded the COVID-19 employment protection benefits enacted. Our findings suggest that the employment protection schemes are extremely effective in reducing the number of vulnerable individuals. The relative importance of rent and mortgage suspensions, (likewise, widespread COVID-19 policies), in alleviating vulnerability, is highly country dependent.

POPULATION GROWTH INDUCED AND HOUSEHOLDS FINANCIAL VULNERABILITY IN NIGERIA

Nigeria has been recording a rapid increase in its population over the years. This reality has posed a serious concern for the welfare of households especially as the increase in population growth puts households at the risk of financial vulnerability. Based on this, this study is on the move to examined the impact population growth induced has on household in Nigeria. The study made use of secondary data obtained from World Bank and the Central Bank statistical bulletine spanning from 1981 to 2020 to analyze the impact of population growth induced and its financial vulnerability on household using a structural vector autoregressive model (SVAR). After the analysis, the study found out that in the long run, an increase in financial vulnerability, due to an increase in population growth decreases household welfare in Nigeria. Hence, this study recommends that the Nigerian legislature should formulate a law against rapid population growth induced to ensure that the increase in population does not outscore the means of subsistence. JEL: H10; H31 <p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/edu_01/0789/a.php" alt="Hit counter" /></p>

DETERMINANTS OF HOUSEHOLD FINANCIAL VULNERABILITY: EVIDENCE FROM SELECTED EU COUNTRIES

Household debt has been increasing in the last decades, and it poses a threat not only to the financial stability of households but is a precursor of the economic and financial crisis. A downturn caused by the coronavirus pandemic is expected to deepening inequalities, mainly due to the inability of households to repay existing debts or finance basic living needs. Understanding the determinants of household indebtedness and financial vulnerability is crucial for policymakers who process measures to prevent increasing household indebtedness. This paper investigates the determinants of household financial vulnerability in euro area countries using the Household Finance and Consumption Survey micro-dataset collected by the European Central Bank. The quantitative approach was applied using ordinary least square and quantile estimation procedures. The difference between OLS and quantile estimations showed the appropriateness of using the quantile regression approach. Performance analysis proved that only the number of elderly and the value of wealth and existence of mortgage interest tax relief statistically significant affects the level of vulnerability in all three waves. While the increasing number of elderly and greater value of household wealth lowers the vulnerability, the effect of mortgage interest tax relief differs across individual waves. All other used factors are essential and statistically significant for the financial vulnerability of households as well, but the importance and significance could differ across the distribution and individual waves. The effect of financial assets, education, and employment were found to be negative in all observations of all waves. On the other hand, the number of children and the value of households’ real assets is associated with increased financial vulnerability indicators.