I Can't Believe It's Not AO3

Chapter Text

The COVID-19 pandemic exposed critical linkages between health shocks and financial decision-making in the United States, where readily available, free primary healthcare is not universally accessible and treatment expenses are considerable. While macroeconomic impacts were widely studied, less attention has been paid to how individual perceptions of health risks— such as fear of infection or financial strain from medical costs—shaped microeconomic behaviors like precautionary savings. This gap is pivotal: understanding the relationship between health beliefs and financial actions can inform policies and business strategies to enhance resilience during crisis (Hausmann & Schetter, 2022; Pangallo et al., 2024; Roy et al., 2021).

Traditionally, economic models often treat health shocks as exogenous to financial decisions (Carroll, 1997). Yet behavioral evidence shows that perceptions of risk drive action (Liu & Menegatti, 2019; Warmath et al., 2022; French & Vigne, 2019). For instance, households receiving negative health news rapidly increase emergency savings while cutting long-term investments (Smith et al., 2001). The pandemic amplified this dynamic, creating simultaneous health and economic uncertainties that uniquely tested household preparedness (Bayer et al., 2023). With inflation, job instability, and medical costs rising, families faced stark trade-offs between consumption and precautionary saving—a behavior poorly captured by classical models. Similar patterns likely apply in other countries with comparable healthcare systems where health and financial vulnerabilities intersect.

This study adapts the Health Belief Model (HBM)—a framework from health psychology—to explain financial preparedness within the U.S. context. The HBM posits that behavior is driven by perceived susceptibility, severity, and “cues to action” (Rosenstock, 1974). We argue that precautionary savings during COVID-19 functioned as a financial analog to health prevention: households saved to mitigate perceived economic vulnerabilities, much as patients adhere to treatments to avoid illness. Prior research supports this lens; for example, perceived financial vulnerability predicts emergency savings (O'Neill et al., 2022), and pandemic-related health anxiety correlated with conservative financial behaviors (Warmath et al., 2022).

Using data from the 2022 U.S. Survey of Consumer Finances (SCF), we examine:

1. How perceived severity of COVID-19 (financial hardship) influenced savings.

2. Whether government assistance (a “cue to action”) increased precautionary savings.

3. How these patterns varied by race/ethnicity, reflecting historical disparities in risk exposure.

Our findings aim to guide financial institutions, policymakers, and businesses in designing interventions that address both health and economic vulnerabilities—a need highlighted by the pandemic’s lasting effects in healthcare systems characterized by high treatment costs and variable access.