The role of financial literacy for financial resilience in middle-age and older adulthood

Abstract

Purpose Preserving sufficient financial assets is crucial for maintaining the standard of living. The lack of adequate financial cushion can translate into financial hardship at any age, but its effects can be especially severe in later adulthood. The authors evaluate whether financial literacy can prevent individuals from depleting the stock of liquid financial assets below a predefined minimum level.Design/methodology/approach Defining financial resilience as the ability to maintain the value of household savings above the level of 3-monthly incomes, the authors examined whether financial literacy is (1) prospectively associated with the probability of losing financial resilience and (2) the probability of gaining financial resilience among financially vulnerable middle-aged and older adults. To this end, the authors applied the multivariate Cox proportional hazards model with time-varying covariates. Data were retrieved from the Survey of Health, Aging and Retirement in Europe with the sample comprising 13,718 adults aged ≥ 50 years in (1) and 12,802 in (2).Findings The authors show that financial literacy plays a protective role for financial resilience. Its role is not symmetrical and protects more against the loss of financial resilience than it contributes to the gain of financial resilience. Among individuals aged 65–74, the association between financial literacy and financial resilience is weaker than among adults in the middle-age (50–64) and among the oldest (75+).Social implications Fostering financial literacy can be important to help middle-aged and older adults maintain a good quality of life and favorable living standards.Originality/value Given the scarce evidence on the links between financial literacy and financial resilience among middle-aged and older adults, the article contributes to the literature by examining whether financial literacy retains its protective role in later stages of the life course.

Income shock and financial well-being in the COVID-19 pandemic: financial resilience and psychological resilience as mediators

“…Lack of financial literacy has been found to decrease financial resilience or an increase in financial fragility (Lusardi et al, 2021;Bialowolski et al, 2022). The common thread in these studies is the fact that financial capability enables individuals to avoid the downside of spiraling into financial distress (Xiao and Kim, 2022).…”

“…Using data from the GFLEC (Global Financial Literacy Excellence Center) Personal Finance (P-Fin) Index, Lusardi et al (2021) found a strong link between lack of financial literacy and financial fragility. Bialowolski et al (2022) found that financial literacy has an asymmetric effect on resilience. While it has a protective role in preventing loss of financial resilience below a certain threshold, it does not enhance financial resilience per se.…”

“…Lack of financial literacy has been found to decrease financial resilience or an increase in financial fragility (Lusardi et al. , 2021; Bialowolski et al. , 2022).…”

“…(2021) found a strong link between lack of financial literacy and financial fragility. Bialowolski et al. (2022) found that financial literacy has an asymmetric effect on resilience.…”

Impact of financial literacy and financial confidence on the savings behaviour of the farmers: the Indian scene

“…Lusardi and Mitchell (2014) defined FL as the knowledge of basic financial concepts and having the skill to make effective financial decisions. Extant scholarship suggests that individual with higher FL exhibits desirable savings and investment behaviour (Bhushan, 2014), mitigate financial risk through diversified financial assets and absorb financial shocks effectively (Bialowolski et al. , 2022).…”