Early life conditions and financial risk-taking in older age

Using life-history survey data from 11 European countries, we investigate whether childhood conditions – such as socioeconomic status, cognitive abilities and health problems – influence portfolio choice, including homeownership, and risk attitudes later in life. After accounting for the corresponding conditions in adulthood, we find that both higher childhood socioeconomic status and cognition (especially mathematical ability) are strongly and positively associated with owning risky financial assets, a house, as well as with one’s willingness to take financial risks. In stark contrast, having had health problems in early life negatively affects only homeownership in older age. Finally, favorable childhood conditions are also positively associated with the transition in and out of risky asset ownership several decades later, both by facilitating investing and making divesting less likely