How to Comprehensively Manage Household Risk Exposure

idea light bulb

Household wealth—the difference between a household’s assets and its debt—is a crucial aspect of economic security. It allows households to pay for necessities during an economic emergency, and it permits families to invest in their future—pay for their children’s or their own education, start a business, switch jobs, move to advance their careers, and plan for a secure retirement.

For a family to benefit from it, household wealth has to actually be there when households need the economic security that comes from having wealth. Over the past few decades, however, household wealth has become increasingly volatile, meaning that wealth has swung up and down much more widely over the past two decades than it did in the preceding decades after World War II. Macroeconomic instability due to the housing and stock market bubbles—and bursts—is one of the contributing factors, but so is greater household-wealth risk exposure due to more investments in the housing and stock markets and greater household debt than in the past.

For more on this topic, please see: