Exposed? Modelling patterns of financial risk amongst working-age adults using latent class analysis

All households face some risk that they will suffer economic loss, whether through avoidable or unavoidable events. It is common for risk to be discussed in the context of saving and investment decisions, but consumers often take risks in a variety of ways.

The aim of this research, therefore, was to determine the extent to which different types of risk co-occur in individual consumers and the relationship between various types of consumer risk.

The research had the following specific objectives:

• Identify a range of risks to financial security;
• Consider the extent to which people are exposed to multiple risks;
• Describe people according to the particular risks they display; and
• Describe the socio-demographics of people displaying different combinations of risk.

Latent class analysis was used to identify how a range of common risks co-exist, using data from the Financial Services Authority Baseline Survey of Financial Capability.

Exposed? Modelling patterns of financial risk amongst working-age adults using latent class analysis (PDF, 667kB)