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

Abstract

Financial 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.