A Cross-Country Analysis of Population Aging and Financial Security

Throughout the world, policy makers are concerned about the impact that population aging will have on the financial security of households and nations. Key questions include: (1) are the aging, and soon to be aged populations, adequately preparing for old age? and (2) how does financial preparation vary for those groups likely to be most vulnerable — women, the less educated, and the poor — especially those traditionally excluded from financial markets in less developed regions of the world? We use individual-level household data from the 2014 World Bank Global Findex and supplement it with macroeconomic indicators of old-age security to investigate these questions across both developed (OECD) and developing (non-OECD) countries with various aging populations. Five fundamental indicators of financial security are examined (account ownership, general savings behavior, saving specifically for old age, saving for emergencies, and sources of emergency funds). Results show an aging effect for all the financial security measures. The cohort effects are largest for those who report saving for old age, with older cohorts being more likely to be better prepared for retirement and unexpected emergencies. The most significant effects are for those countries with larger aging populations. Also, those who are female, have less education, and lower incomes are particularly vulnerable, especially those living in developing countries. Further, evidence suggests that the financial security of those living in non-OECD countries is significantly more likely to be affected by public pension spending and other key indicators of old-age security. Financial inclusion and technological usage also have a significant and positive impact on financial security, suggesting that these factors could play a key role in promoting savings and improving financial security in aging populations. The findings from this study have important policy implications given the pressures that some countries' social support and public transfer systems will face in the coming years. Those countries with aging populations that are more financially prepared for the future are likely to see improvements in their populations' overall health and well-being, as well as reductions in poverty and other social and economic inequalities