Financial worry as threat to financial security
The Covid-19 pandemic disproportionately impacted the most vulnerable around the world. According to the World Bank, the pandemic pushed an additional 97 million people into extreme poverty in 2021.
During the pandemic, hundreds of millions found it challenging to meet their medical expenses. 60 percent of those surveyed in Nigeria either experienced or continue to experience financial hardship as a result of the Covid-19 crisis.
Meanwhile, what financial worry means for one person may not be what it means for another, as some see it as a basket of many faces.
However, the meaning of financial worry depends on objective factors such as how much you earn along with subjective perceptions about what constitutes a financially secure life in your particular society.
Therefore, it may be correct to take for granted that people struggling to make ends meet worry more about money than those with savings and access to credit
Therefore, it may be correct to take for granted that people struggling to make ends meet worry more about money than those with savings and access to credit. All the same, there are broader societal factors that also influence worry beyond income levels, for example, the quality of healthcare systems and the effectiveness of social security programmes.
Despite their importance, especially for developing nations, financial worry and its determinants have received little attention from academics and policymakers. For example, the World Bank’s Global Findex 2021 report is the first attempt to measure financial worry globally and thus is an essential step in filling the knowledge gap in the area.
Additionally in Nigeria, a quarter of all respondents reported that paying for healthcare ranked as their biggest worry. In contrast, only 1 in 5 respondents in high-income nations reported worrying about paying their medical bills.
These responses may partly reflect the quality and accessibility of local healthcare services in some nations. Concerns about medical expenses were also generally highest in sub-Saharan Africa (SSA), where the Covid-19 pandemic tested the limited healthcare services.
Better health systems design and performance and more affordable healthcare would help ameliorate some of these worries. Also, expanding financial inclusion – the access to and use of formal financial services by households and businesses – can help reduce financial anxiety. Policymakers see it as a way to help families better protect themselves against shocks.
In many developing economies, sudden illness or an accident that forces a breadwinner to stay home can compound the impact of an external crisis – like the Covid-19 pandemic – with a loss of income.
Availability of formal financial services like targeted insurance programmes can help vulnerable families, over a period of time, reduce the pain over the immediate crisis.
The Covid-19 pandemic remains an ongoing public health and economic crisis. 60 percent of adults in Nigeria reported being very worried about the continued financial toll of the pandemic.
Women, more than men, reported being very worried about financial hardship caused by the pandemic, with 58 percent of women surveyed in Nigeria reporting this. The data confirm the regressive impact of the pandemic on the most vulnerable sections of populations.
Data from the survey also uncovered outstanding regional themes. In Nigeria, for example, 28 percent of adults are very worried about school expenses, which represents the biggest worry for 33 percent of adults in sub-Saharan Africa. By contrast, in South Asia, only 18 percent of adults rank school fees as a top worry.
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The high proportion of adults with school-going children in sub-Saharan Africa may partly explain this worry. It also reflects the high out-of-pocket costs associated with schooling in the region.
There are also regional differences when people assess their future outlook. In East Asia, people are least worried about meeting expenses in their old age, whereas over half of the adults surveyed in sub-Saharan nations reported being very worried about it.
The lack of concern about old-age expenses does not necessarily reflect a sense of security about the future. Instead, it could reflect the urgency of more immediate financial demands than planning for retirement.
Financial inclusion has expanded in recent years, the Findex report finds that 3.3 billion people in developing nations had an account in 2021. It found out also that in Nigeria, 45 percent of those surveyed did have an account. However, only 8 percent of Nigerians surveyed reported ownership of a mobile money account.
Therefore, the gap in financial worry between developed and developing economies remains, however, with half of the adults in developing economies reported being very worried about one or more common financial expenses. Whereas, in high-income economies, only about 20 percent said the same.
Financial worrying impacts overall well-being and is linked with lower productivity and suboptimal decision-making. It also points to gaps in the existing global effort toward building financial resilience. As a result, hundreds of millions in developing nations remain dangerously unprepared to face economic shocks from emerging global challenges such as climate change. The findings from the Findex 2021 report underline the urgency of protecting them.