Does financial fragility affect consumer well‐being? Evidence from COVID‐19 and the United States

Abstract

AbstractFinancial fragility is of considerable concern for consumer well‐being. Besides unleashing a public health crisis, COVID‐19 also ignited a financial crisis and thus represents a natural event from the field to study financial well‐being. We maintain that well‐being is a corollary to one's financial situation. We investigate the linkage between financial fragility and well‐being and the moderating role of financial literacy and personality using US data. We find that financial fragility is negatively associated with well‐being. This pervasive phenomenon during a financial crisis has harmful consequences. We also find evidence of a differential impact of financial fragility on well‐being based on Agreeableness, Conscientiousness, and Neuroticism, supporting our argument that personality has varying degrees of explanatory and predictive power in terms of well‐being. Surprisingly, financial literacy does not modify this relationship, possibly due to the well‐being affecting an individual's cognition and emotions rather than financial knowledge. Our findings could aid policy makers and financial educators in devising timely strategies to deal with post‐crisis complications.