Age structure of the population and the choice of household financial assets

Abstract

China is undergoing changes in its demographic structure, and the burden of raising children and caring for the elderly is negatively affecting the welfare of Chinese families. Optimising the financial structure of households may be an effective solution. Using data from the 2017 Chinese Household Finance Survey, in this study, we empirically analyse how the age structure of the population affects a household's finances by applying probit and tobit models. It was found that an increase in the proportion of infants in a family has a crowding-out effect on its investment in risky and deposit assets, and an increase in the proportion of elderly family members encourages the replacement of risky assets with savings. Further mechanism tests showed that the presence of infants affects the choice of financial assets by crowding a family's labour or leisure time, increasing expenditures, and changing a family's cash demand, while the presence of the elderly changes household finances because a family's risk preferences are altered by the weakened cognitive abilities of the elderly. Finally, in this article, we advance some policy suggestions, such as regulating capital market management, increasing birth subsidies, and improving the financial literacy of the elderly, to ensure future pension security.

How Does Fertility Policy Relaxation Affect Household Financial Asset Allocation? Evidence from the Universal Two-Child Policy in China

“…Our study provides further evidence to evaluate the impact of the number of children and household fertility decisions on risk asset holdings. The results show that the increase in the number of children will have a significantly negative effect on risk asset holdings, which is consistent with the studies of Loayza et al (2000) [9], Kang and Hu (2021) [10], and so on. Furthermore, we focus on the intention effect, which not only includes the direct effect of having more children, but also the expectation effect.…”

“…To ensure the life quality of the new child, the household's consumption expenditure level will increase to a certain extent, which will reduce the household's willingness to invest. Kang and Hu (2021) reaches a similar conclusion, stating that as the promotion of infants increases, the probability and proportion of household holding risk assets decrease [10]. Calvet et al (2014) finds that larger households tend to choose conservative investment portfolios (lower proportion of risky assets in household wealth) because the number of adults and children reduces per capita wealth and the larger households have higher expenditure-wealth ratios and need to bear the risks brought about by the random demands of a large number of family members [11].…”

“…This paper contributes to the literature in the following aspects. Firstly, in the literature, while scholars have pointed out that family structure and the number of children are important factors related to household financial asset allocation, the results are mixed [9][10][11][12][13][14]. Large studies deem that the increase in children number will have a significant impact on risk asset holdings, but little attention is paid to the situation in China.…”

The impact of digital finance on household participation in risky financial markets: Evidence-based study from China

“…Many scholars have studied the factors affecting household investment behavior, mainly from the dimensions of household demographic characteristics, background risks, and economic characteristics. First, the existence of household heterogeneity makes households allocate financial assets according to their own characteristics, such as age [ 19 ], education [ 20 ], household wealth [ 7 ], and risk attitude [ 21 ]. Second, households often face background risks, such as labor income risk [ 2 ], health risk [ 22 ], and commercial and their own-residential property investment risks [ 23 , 24 ].…”