The prospective associations between financial scarcity and financial avoidance

Abstract

The current study investigated the prospective associations between financial scarcity and financial avoidance. We hypothesized that over time, financial scarcity––the experience of lacking needed financial resources––is associated with an increase in financial avoidance––the tendency to avoid dealing with one’s finances––, and vice versa. In a longitudinal panel study, including a large and representative adult sample of Dutch citizens (initial N = 1,122, final N = 837), we measured financial scarcity and financial avoidance twice over a period of 22 months. Data were analyzed using a cross-lagged panel model, which allows to test for prospective effects of one variable on the other, while controlling for autoregressive effects. Confirming our preregistered hypotheses, results showed that financial scarcity was positively related with an increase in subsequent financial avoidance, whereas financial avoidance was positively related with an increase in subsequent financial scarcity. While these longitudinal findings are not causal, they are in line with the concept of a poverty trap, where financial scarcity and financial avoidance form a temporally dynamic and increasing relationship.

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