Money management in households

Private households dispose of a major part of a nation's financial resources. Consequently, financial decisions taken by households affect a nation's overall welfare. Regulators, marketers, consumer protectionists, businesses and economists are in need of knowledge about how households operate if they are to understand and shape household decisions. Economic models that fail to take account of systematic variations in household financial practices will inevitably be less accurate in predicting the impact of policies aimed (for example) at enhancing the well-being of children, encouraging debt avoidance or combatting poverty. The standard economic concept of a household has perhaps been best described by Becker (1973). He applied the notion of maximisation of (human) capital to the household level and described the stereotypical roles of male breadwinner and female carer as a rational use of human capital. His thesis was that households as exemplified by marriage offer gains in trade and economies of scale by means of specialised human capital. Since women have a ‘comparative advantage’ in bearing and caring for children, they should invest primarily in domestic capital. To date, it makes economic sense for couples to adhere to this pattern when male earnings are (typically) higher than women's and the latter bear the children (Burgoyne et al., 2007). This normative economic ideal contrasts with the reality of households which are driven by multiple factors beyond the maximisation of economic benefits through role specialisation. Psychologists, in particular, have been concerned with describing financial household dynamics as a multidetermined set of socially negotiated practices. But what is a household? The concept is widely used as the main unit of analysis by researchers and policy makers, yet few present a clear definition. Given that most people share a household, we are interested in households composed of more than one member. Such multiperson households have either been broadly defined as ‘a group of people who share resources, activities and expenditures’ (Casimir and Tobi, 2011, p. 503) or, more pragmatically, as all persons living together in a housing unit (United Nations, 2016).