Cluster Analysis of Financial Risk Profiles Across the EU

This study examines financial risk profiles across EU Member States, exploring their relationships with financial literacy, financial behavior, education, income, and digital competencies. We utilize data from the Flash Eurobarometer 525, surveying over 26,139 individuals across the EU, and employ cluster analysis based on self-reported financial fragility as a proxy for risk aversion. Statistical methods, including correlation analysis, unifactorial regressions, and t-tests for means, assess the relationships between variables above. The t-tests results highlight significant differences in risk attitudes across quartiles, with higher quartiles (less risk-averse) showing systematically distinct risk profiles. In contrast, the corresponding financial literacy, digital competencies, and financial behavior show limited variation, except for a marginal difference between intermediate quartiles. Education and household income reveal significant disparities primarily in the extreme quartiles, suggesting that economic conditions and educational attainment shape risk preferences. Findings challenge classical economic theories by showing that higher financial literacy correlates with greater risk aversion, while higher education levels align with lower risk aversion. Household income exhibits a moderate negative relationship with risk tolerance. The results underscore the heterogeneity in financial behaviors across the EU, emphasizing the need for tailored financial policies—ranging from risk-mitigating regulations in risk-tolerant clusters to strategies fostering financial market participation in risk-averse ones.