The financial resilience of households: 22 country study with new estimates, breakdowns by household characteristics and a review of policy options

Some households are less resilient to financial shocks than others. This may be because they have low levels of savings, have limited access to affordable credit, already hold high levels of debt or lack the skills required to manage household budgets. Financial resilience is difficult to estimate because it is a dynamic concept – the ability to recover quickly from an income or expenditure shock. This means that we have to turn to indicators of resilience. In this paper we present new estimates using harmonised micro-data for 22 countries and a number of different indicators focusing on households’ savings and debt relative to their income. The results show considerable variation across countries and between households within countries. Some of this variation is likely to be due to differences in financial institutions, welfare states and cultural norms. This research was conducted prior to the Covid-19 pandemic but these baseline statistics on the financial resilience of households highlight just how vulnerable some households were to the financial shocks that followed. In 15 out of the 22 countries included in this research fewer than half of all households held sufficient savings to cover the value of three months’ income and many were already over-indebted. How countries respond to the pandemic in terms of protecting households’ livelihoods will be an important factor affecting households’ resilience and longer term prospects.