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Why does household finance matter?

In this post, I would like to highlight the importance of Household Finance.  There is substantial empirical evidence that a majority of households are not very good at making financial decisions.  For instance, they have trouble deciding on which mortgage to take, how much to save for retirement, how to allocate their investments across various assets, etc.  In the academic literature, the view has been that helping individual households will have benefits only for that household, and very often, the gains to the individual household are small.  But, what Harjoat Bhamra and I show in a recent article, “Does Household Finance Matter? Small Financial Errors with Large Social Costs”, is that improving the financial decisions of households can have substantial benefits not just for households also for society. Vox.eu has also published a piece based on this article as has the IB Knowledge website of Imperial College Business School. 

Published in Household finance

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