Factors Influencing Precautionary Wealth of Slovak Households

: Household financial stability is a fundamental pillar of overall economic well-being, especially during periods of uncertainty and crisis. Maintaining adequate precautionary wealth not only mitigates financial stress but also fosters more confident financial decision-making. Households with sufficient reserves are less dependent on credit, better protected against debt accumulation, and more capable of preserving long-term savings and investment strategies during short-term disruptions. This paper investigates the key determinants of precautionary wealth held by Slovak households. The study aims to identify and quantify the influence of wealth-related, demographic, and financial variables on the formation of precautionary wealth. We hypothesize that wealth-related factors, particularly the capacity to accumulate personal financial assets (PFA) play the dominant role. Using data from the Slovak sample of the Household Finance and Consumption Survey and employing ordinary least squares (OLS) regression, we estimate four models (full, preferred, factor, and simplified). The preferred model reveals that PFA has the strongest positive effect on precautionary wealth. Together, PFA and income account for over 56% of the total explained variance. Among financial indicators, ECB policy rates show a positive association, while real deposit rates have a negative effect, suggesting behavioral biases in household responses. Demographic variables, such as age, gender, and education, play a comparatively smaller role. The findings emphasize the dominant role of wealth-related and financial variables in precautionary wealth accumulation.