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27 January 2020 General
Wasmachine verhuizen

A new DNB study reveals that a share of the Dutch population is vulnerable to financial setbacks. One in seven Dutch residents is unable to raise EUR 2,000 in case of a financial emergency. Tenants, single parents and people with an overdraft on their payment account significantly more often qualify as financially vulnerable.

One in seven Dutch residents has no emergency savings

A survey that is representative for the Dutch population shows that not everyone has the necessary emergency savings available to pay for unexpected urgent expenses. Six out of seven respondents said they would probably or definitely be able to raise EUR 2,000 within a month in the event of a financial emergency. Compared to the level of emergency savings recommended by the National Institute for Family Finance Information (Nibud) this is a relatively modest amount, yet one in seven Dutch residents said they would probably or definitely not be able to raise this amount within a month. Well over 50% of this group said they would not even be able to raise EUR 500. The emergency savings buffer that the Nibud recommends for a single person without children living in rented accommodation amounts to several thousands of euros. Homeowners, car owners and households with children are advised to build up even higher reserves. While the survey on which the present study is based dates back several years, recent data for the Netherlands confirm that the financial position of a substantial part of the Dutch population can be described as fragile. The added value of the DNB study is that it provides insight into how Dutch people manage to raise the necessary financial resources in emergency situations, identifies financially vulnerable groups and clarifies the relationship between financial knowledge and financial fragility.

Raising funds in financial emergency situations

Respondents mentioned several options to raise funds in cases of financial setback. Most of them said they would withdraw the money from a payment or savings account. One in six said they would call in the help of family or friends for the full amount or part of it. The third most-cited option was to use a credit card. If the full amount could not be drawn from a payment or savings account, the respondents mentioned several other options to raise the funds. The group of respondents with an overdraft on one or more payment accounts most often said they would take out loans. In addition to using a credit card or calling on family or friends, this group also relatively often indicated they would work more hours or sell possessions (e.g. on consumer-to-consumer trading platforms) in order to raise the necessary funds.

Declining share of financially vulnerable Dutch residents

A comparison of the study results and the results of international research conducted immediately after the financial crisis shows that the share of the Dutch population that qualifies as financially vulnerable has declined. According to the study, Dutch households were less financially vulnerable compared with households in the United States and most other countries in the study, including France and Germany. However, the fact that a considerable share of Dutch residents still qualifies as vulnerable in the event of a financial emergency, even after several consecutive years of favourable economic conditions and falling unemployment, remains a cause for concern. It means that although the Dutch population is generally known for its thriftiness, there are still one million Dutch households whose financial situation can be described as fragile.

Better "save" than sorry

Several parties, including DNB and Nibud, have joined forces in the Money Wise platform with the aim of increasing the financial resilience of households. They are encouraging financially vulnerable groups to try and set funds apart for unexpected urgent expenses. The study shows that financial vulnerability often goes hand in hand with limited financial knowledge and numerical skills. This implies that education and information could help convince more households to prepare for unexpected expenses and to raise their financial resilience.

Vulnerable groups

The study identifies several vulnerable groups, which may help to tailor any actions to these specific groups. Tenants (30%) and single parents (40%) relatively often qualify as financially vulnerable. Having an overdraft on a payment account also is an important indicator of increased likelihood of financial fragility. A share of 45% of this group is unable to raise EUR 2,000 within a month in the event of unexpected urgent expenses.