The present study investigated people’s financial behaviour under economic strain and its differences depending on participants’ age and year of data gathering between 1999 and 2019. We also examined how attitudes towards consumption affect consumers’ behaviour in economically tight situations. We found four types of financial behaviour: cutting expenses, borrowing, increasing income (working, selling possessions), and gambling. Our analyses revealed that the effects of age, year of data gathering, and attitudes towards consumption on the behaviours varied in interesting ways.
Financial Behaviour Under Economic Strain in Different Age Groups
The four types of financial behaviour under economic strain varied by participants’ age. Two age groups—the youngest (18–25) and the oldest (66–75)—had the most distinct characteristics in comparison to other age groups. The youngest participants reported the lowest frequency of borrowing and gambling and the highest frequency of increasing income (together with participants aged 26–35). Participants aged 66–75 scored the lowest in cutting expenses and increasing income in comparison to all other age groups.
Participants at the peak of their careers (ages 26–55) reported highest frequencies of cutting expenses under economic strain (not the emerging adults, people approaching retirement, or retired). One explanation may be that consumers at the active stage of their careers with stable income usually spend more than consumers of the other age groups, and thus, they are able to cut expenses when facing economic difficulties. In contrast, people at the very start of their careers might have low income which restricts their consumption, and thus, there is less to cut from (Ranta et al. 2012; Xiao et al. 2014). Interestingly, the most senior participants (aged 66–75) scored the lowest in cutting expenses. On the one hand, people at the retirement age have lower income, and thus, they may minimize their expenses overall. Hence, reducing expenses further becomes impossible. An alternative explanation, which is in line with the permanent income hypothesis (Friedman 1957) and life cycle theory (Modigliani and Brumberg 1954), is that people of this age may have savings, and thus, they do not consider cutting expenses even when under economic strain.
The most frequent borrowers were the participants over the age of 35. Borrowing—both from close people and financial institutions—is common at all stages of adulthood. However, this result contradicts that of Lusardi et al. (2011), who found that individuals aged 18–34 were more likely to borrow from family and friends than older adults, and young adults were more likely to take advantage of consumer credits (e.g., instant loans, pawning the assets) in comparison to individuals aged 55–65. In contrast to the previous studies in the United States (US) (Lusardi et al. 2011) and the Netherlands (Wiersma et al. 2020), we found that, in Finland, borrowing is at its lowest in emerging adulthood (age group 18–25). Therefore, it is possible that Finnish young adults are not yet trusted by banks to be provided with loans. Many young adults are also still financially dependent on their parents, and parental financial support may not be considered borrowing.
As suggested by previous research (Lusardi et al. 2011; Wiersma et al. 2020), we found that the attempts to increase income under economic strain were somewhat linearly dependent on participants’ age. That is, the youngest participants (aged 18–25) scored the highest for increasing income, the oldest participants (aged 66–75) scored the lowest, and the other age groups scored in between. As suggested by the previous literature (Fiksenbaum et al. 2017), our dimension of increasing income included both working more and selling personal goods. Young people scored the highest, suggesting that young people are more likely to have fixed-term work with flexible/irregular hours and a possibility to work more if needed (Lusardi et al. 2011). In contrast, people with established careers and fixed contracts have less flexibility with the amount of work they are able to perform. In addition, the family life of middle-aged adults may restrict them from working more in comparison to emerging adults. In terms of the frequency of selling personal possessions, online-selling opportunities have made the selling of personal items easier and more profitable than before (Lusardi et al. 2011). Arguably, young people are more familiar with the online services and social media and therefore appear to use this option more than other age groups (Silinskas et al. 2021). Older adults, in turn, might value possessing property and feel emotional attachment to the goods obtained throughout the years (Cram and Paton 1993; Gentry et al. 1995).
Finally, participants of our three oldest age groups (46–75) reported more frequent gambling than others, and participants of the youngest age group (18–25) scored the lowest. This was in contrast to previous research which suggests that gambling peaks in youth between the ages 18 and 30 (Welte et al. 2011; Wiebe et al. 2006). However, it is likely that young people gamble for fun rather than trying to solve financial problems.
Our study also investigated the interactions between age and year of data gathering on financial behaviour. A complex pattern of interactions was found (Figs. 1, 2, 3, and 4). However, for clarity reasons, the interactions are easier to understand in the context of the main effects.
Financial Behaviour Under Economic Strain Across 20 Years (1999–2019)
Our study results highlight the fact that individual behaviour under economic strain is at least partially a reflection of the concurrent macro-environment. For instance, consumption in 1999 was characterized by the higher frequency of cutting expenses, lower instances of borrowing, and less gambling in comparison to any other year of data gathering. Drawdowns of consumer credit were not common in 1999, which can explain less frequent borrowing in 1999 than in other years. Moreover, in 1999, there was an economic boom due to the increasing value of ICT companies, and people’s incomes were growing rapidly. Due to the debt problems caused by the depression in 1990–1994, consumers avoided taking loans for many years and were cautious as consumers. The debt ratio of private households was rather low in 1999 compared to the years before and after.Footnote 2 Another reason is that the deregulation of the financial market in Finland was rather recent, and therefore, financial companies did not have yet a large selection of financial products to offer (Jonung et al. 2008).
Individuals’ financial behaviour under economic strain was somewhat similar in 2004 and 2009. The year 2004 was a period of growing consumer confidence and growth in GDP. Conversely, the year 2009 was still affected by the finance crisis. Yet, both years can be characterized by less frequent instances of cutting expenses and attempts of increasing income (compared to 1999, 2014, and 2019). In contrast, people in 2004 and 2009 relied more on borrowing and gambling than in other years. Although we expected to find this behaviour during the economic boom in 2004, it was surprising that people reported similar behaviour in 2009 during the economic recession. One explanation can be that consumer credit became more freely available, and instant loans were introduced during the economic boom in the 2000s (Autio et al. 2009). Thus, people relied on borrowing to overcome economic difficulties instead of cutting their expenses or increasing income. The debt ratio of Finnish households started to increase steeply around the year 2005,Footnote 3 which indicates both low interest rates but could also reflect changes in attitudes towards credit and debt. On the other hand, due to high levels of unemployment (Dew and Xiao 2013), people in 2009 could have borrowed from other people as they were not able to work more. One more explanation is that people answering the questionnaire in 2009 referred to their previous financial behaviour before the economic recession. Furthermore, the decrease in private consumption in Finland between 2008 and 2009 was not dramatic (Raijas 2014).
Consumers under economic strain borrowed less in the last decade (years 2014 and 2019) than consumers in all previous years of data gathering, which was surprising. The years 2014–2019 were a period of economic growth, and the consumption of private households also increased, albeit slowly. However, the number of the drawdowns of consumer credit has increased notably in recent years, and the debt ratio of private households is higher than ever before.Footnote 4 Therefore, it could be expected that people in economic strain would resort more to borrowing in 2014 and 2019 than before it. It is thus likely that consumers do not always take loans due to financial strain but rather for aspirational purchases (e.g., hedonistic motives). For instance, according to the statistics of the Bank of Finland, the amount of consumer credit typically increases during summer vacation months, which suggests that people require extra money for travelling and other free-time activities.Footnote 5
Consumer behaviour in 2014 was similar to that in 2004 and 2009, with a lower frequency of cutting expenses than that in 1999 and 2019. Finally, financial behaviour under economic strain in 2019 can be characterized by the highest frequency in increasing income in comparison to the other years of data gathering. This can be explained by the good employment situation, as the unemployment rates were lower in 2019 than in previous years.Footnote 6 Moreover, as mentioned above, selling personal goods using online platforms became easier than before.
Attitudes Towards Consumption
Many studies on financial behaviour have applied the theory of planned behaviour (Ajzen 1985; Fishbein and Ajzen 2010), which suggests that attitudes and intentions are likely to guide people’s financial behaviour (e.g., Ajzen 2016; Hegner et al. 2017; Vermeir and Verbeke 2006). In this study, we found three types of attitudes: saving-oriented, deprived, and hedonistic (Kuoppamäki et al. 2017; Wilska 2002). Saving-oriented attitude towards consumption is primarily related to more frequent cutting of expenses and less frequent borrowing. Hence, it is behaviour that promotes saving (Baek and DeVaney 2010; Lusardi et al. 2011; Wiersma et al. 2020). Similarly, we found that people with higher saving-orientation were more prone to increasing income and were less likely to engage in gambling.
The deprived attitude towards consumption was positively linked to all financial behaviours under economic strain, that is, cutting expenses, borrowing, increasing income, and gambling. Presumably, feeling deprived in terms of consumption indicates long-term financial deprivation, in which all means of surviving financially are used. Gambling, in particular, has been found to be associated with feelings of relative deprivation (Callan et al. 2008).
Finally, the hedonistic attitude towards consumption was related to the lower frequency of cutting expenses and higher frequency of borrowing, increasing income, and gambling. This aligns well with the idea that people holding hedonistic attitudes are more likely to borrow to consume at levels equal to their reference group or to increase income instead of cutting their consumption. This may stem from the fact that hedonistic attitudes promote well-being derived from the notion of “keeping up with Joneses” (Dew 2007). People with hedonistic attitudes towards consumption may also wish to derive pleasure from consumption in whatever available means (Hirschman and Holbrook 1982), instead of cutting their expenses.
Limitations and Strengths
Some limitations need to be acknowledged concerning our study. First, although we collected data at five time points, this study was cross-sectional and precludes causal interpretations of the findings. To gain a better understanding of the process that a consumer goes through in his or her lifetime, a longitudinal study following the same participants would be ideal. Second, the study relied on self-reported data, which is prone to social desirability bias. Also, the respondents’ answers to the subjective data are open to interpretation. For example, the subjective evaluation of one’s financial situation could be studied more comprehensively in further studies (although it was not the key focus here, and it has been studied in many studies with a single measure, e.g., Ranta and Salmela-Aro 2018). Third, we did not ask about the exact situation causing economic strain in participants’ lives or whether their financial difficulties were temporary or permanent. In particular, the financial behaviour under economic strain may depend on whether financial difficulties are perceived as temporary or permanent (e.g., cutback in hours at work to a long-term disability), and the depth of the financial difficulties (e.g., due to mental or physical health, unemployment; French and Vigne 2019). In previous studies, for instance, Baek and DeVaney (2010) took into account whether and for how long a household head was unemployed during the past year and the health status of a household head. Dew and Xiao (2013) asked participants about the degree to which their finances have changed between 2008 and 2009 on a scale from one (have gotten much worse) to five (have gotten much better) and how often they worried about not being able to pay bills from one (never) to five (all the time). Unfortunately, information measuring the degree and causes of the economic strain was not collected in the current study. Instead, the survey was constructed in such a way that people were expected to answer about their situational/temporary/usual way of responding in financially tight situations. Despite this, some people might have reported about their permanent situation. Controlling for the depth of the economic strain or the situation that caused it should be considered in future research. Finally, we collected data in Finland, a Nordic welfare state. Therefore, caution regarding generalization to other countries needs to be acknowledged.
Despite the limitations, this study provides a broad picture of people’s economic behaviour under economic strain over a long period of time. Most previous studies have focused on only single dimensions of economic behaviour, such as taking loans and credit (e.g., Gamble et al. 2019; Ottaviani and Vandone 2011), gambling (e.g., Callan et al. 2008; Lusardi et al. 2011), and saving (Dwyer et al. 2011; Webley and Nyhus 2001), in one point of time. In addition, our analyses included attitudes towards consumption, which, in sociological theories, are interpreted as reflecting social status and identity (Bourdieu 1984), and hedonistic pursuit for pleasure (Campbell 1987). In our study, the attitudes appeared as powerful predictors of individuals’ financial behaviour under economic strain. This extends our understanding of consumer behaviour during macro-economic crises in particular. Consumer behaviour is not just a function of income, age, and life course stage; it contains a far more complex set of determinants.
Furthermore, our results also increase knowledge of individual motives for financial behaviour under financial strain at different age periods and thereby provide tools for financial life management (i.e., making adjustments to make ends meet), which directly relate to well-being (Baek and DeVaney 2010; Ranta et al. 2020a, b; Ranta and Salmela-Aro 2018; Serido et al. 2013; Xiao et al. 2014). Currently, a global economic crisis will emerge as a consequence of the COVID-19 virus. Therefore, there will be an urgent need for new research about changes in consumers’ behaviour under economic strain. Particularly comparative studies on the topic across societies and in different cultures will be increasingly important in the future.
The outcome of the current research, that is, increased knowledge of long-term trends in financial behaviour under economic strain in different age groups, provides valuable tools for consumer policy, consumer education, and consumer regulation. In Finland, there are very strong and organized consumer policy authorities that particularly aim at increasing consumers’ competence to manage their economy and finances (Wahlen and Huttunen 2011). Finnish authorities also strictly follow European Union consumer regulations (Raijas et al. 2010). In 2020, the Bank of Finland was given the responsibility of coordinating and implementing a national strategy for personal finance management and financial behaviour of Finnish citizens (Bank of Finland 2020).
Our research revealed that people cannot be treated as a homogeneous group of financial actors. They have different strategies in coping with economic strain, varying by age and life course stage, social background, gender, and consumption attitudes and preferences. Thus, financial regulation, consumer advice, and educational campaigns should better acknowledge these differences and flexibly target the policy actions to specific consumer groups. It is also important to be aware of the effects of the present major global trends: digitalization of consumption and finances, macro-economic fluctuations, and crises such as COVID-19 on the financial behaviour of consumers. In rapidly changing social and economic environments, consumer legislation and financial regulation will need more frequent updating in the future, both in Finland and in the European Union.