Financial fragility and adaptive resilience among urban middle-class households during economic crises: a behavioural finance perspective

Abstract

The growing instability of economic systems, rising inflationary pressures, digital consumerism, and debt-driven lifestyles have significantly altered the financial condition of urban middle-class households in emerging economies. Despite apparent income growth, many households experience declining wealth accumulation, increasing financial anxiety, and reduced shock-bearing capacity. The present study investigates the behavioural, structural, and psychological determinants of financial resilience among urban middle-class households in India during periods of economic crises.

The study develops an integrated framework combining financial literacy, income volatility, debt dependency, behavioural consumption pressure, digital financial exposure, and financial anxiety to explain household financial resilience. Primary data were collected from 512 middle-class households across urban regions of North India using a structured questionnaire. The study employs Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis (CFA), Multiple Regression Analysis, and Structural Equation Modelling (SEM) to examine relationships among variables.

The findings reveal that adaptive financial capability, emergency liquidity reserves, and disciplined financial behaviour significantly enhance resilience, whereas digital consumerism, EMI dependency, and financial anxiety reduce household stability. Financial anxiety partially mediates the relationship between income volatility and financial resilience. The study contributes to the literature on household finance, behavioural economics, and financial wellbeing by introducing a multidimensional framework for measuring household financial resilience in emerging economies.