Research On Family Financial Asset Allocation In China From The Perspective Of The Family Life Cycle

With the rapid development of China’s financial markets,Chinese households have a more diverse range of financial assets to choose from.However,there is a serious problem of imbalance in the asset structure of Chinese households,characterized by a single structure,low participation in risk assets,a high proportion of real estate,and poor liquidity.Currently,the asset structure of Chinese households is not conducive to increasing asset income,nor is it conducive to diversifying asset risks,thereby inhibiting the release of the consumption potential of Chinese households.At the same time,China’s demographic structure is undergoing a dual transformation of "aging" and "depopulation." Since entering an aging society,aging has continued to accelerate,with the proportion of the population aged 60 and above increasing rapidly from 10.5% in 2000 to 19.8% in 2022.In contrast,the proportion of the population aged 0 to 15 in China in 2022 was only 18.0%.The imbalance in population structure implies an imbalance in the proportion of family life cycle stages in the entire society.If we briefly divide the family life cycle in China into three stages: the formation stage(couples),the child-rearing stage(families raising children),and the empty nest stage(couples with no children at home after the last child leaves),China is currently facing a clear trend of an increasing number of families in the formation and empty nest stages,while the number of families in the child-rearing stage is decreasing.From the current situation in China,families in the formation stage have low wealth levels and poor risk resistance,while families in the empty nest stage have a low degree of risk due to pension security issues.Therefore,families in the formation and child-rearing stages have a lower degree of participation in risk assets.This also means that China will face the severe problem of insufficient family financial asset allocation and imbalanced participation in the future.This trend is not conducive to the future capital supply of China’s financial market and the increase in the property income of Chinese households.The family,as the basic unit of the economy and society,also exhibits significant differences in the structure of financial asset allocation at various stages of the life cycle.Therefore,studying the impact and mechanism of the family life cycle on financial asset allocation,as well as the role of population policies and promoting the rationalization of the structure of family financial asset allocation in China,is of great significance.According to data from CHFS,Chinese families have a significant problem of "light investment,heavy savings,and high debt." The imbalance in financial asset allocation in Chinese families will significantly affect the release of family consumption capacity.Therefore,studying the impact of family life cycle stages on the balance of family financial asset allocation is important for unleashing the consumption capacity of Chinese families,promoting the increase in family asset income,and rationalizing the balance of family financial asset allocation.At the same time,according to existing research,real estate and financial assets are the two most important components of family assets.The risky part of financial assets has income uncertainty,which can significantly affect the family’s asset structure and wealth level,thereby affecting residents’ consumption.Real estate in China not only meets the basic housing needs of families but also has important financial attributes,covering various roles in investment,loans,transactions,and financial markets.Moreover,unlike risk-free assets such as time deposits,real estate has significant price durability and lower liquidity,which significantly affect the family’s asset structure and wealth level,thereby influencing family consumption.Therefore,the allocation of family risk financial assets and real estate will affect the family’s asset structure and wealth level,leading to significant differences in family consumption wealth effects.In view of this,this study,based on relevant theories such as the family life cycle theory,portfolio theory,monetary demand theory,financial demand hierarchy,and precautionary savings theory,explains the impact of the family life cycle on family financial asset allocation.The research is based on data from the China Household Finance Survey(CHFS)and employs empirical analysis methods such as numerical simulation analysis,Tobit model,OLS model,principal component analysis,and moderation effect model.First,the study analyzes the selection mechanism of family financial asset allocation and the current situation of financial asset allocation at various stages of the family life cycle in China.Second,the study conducts an analysis of the decision model of family financial asset allocation from the perspective of the family life cycle and analyzes the impact of family age and the number of children on family financial asset allocation,verifying the existence of the family life cycle effect on family financial asset allocation.Third,the study empirically tests the impact of family life cycle stages on family financial asset allocation by constructing a model of the impact of family life cycle stages on family financial asset allocation.The study further examines the balance of family financial asset allocation structure and the spatial and intergenerational heterogeneity of family financial asset allocation and conducts multidimensional robustness tests.Finally,the study also examined the impact of the family life cycle on the wealth effects of family financial asset allocation.It conducted separate tests on the wealth effects related to education consumption,daily consumption,and cultural and entertainment consumption,aiming to assess how family life stages affect these specific aspects of wealth effects.The main conclusions of the study are as follows:Firstly,within each stage of the family life cycle,the optimal proportion of risk assets to disposable assets shows an inverted "U" shape as the family life cycle progresses.In the progressive stage of the family life cycle,the optimal proportion of risk-free assets to disposable assets is significantly lower than that of risk assets and shows a stepwise decreasing trend.Families with two children have significantly higher proportions of optimal risk assets and risk-free assets in their disposable income compared to families with one child.Secondly,family age and the number of children exhibit inverted "U" shaped relationships with the allocation structure of risk assets and stock assets.The relationship between family age and the allocation structure of financial product assets exhibits a positive "U" shape.The impact of the number of children on the allocation structure of risk-free assets exhibits an inverted "U" shape.Family age and the number of children have spatial and intergenerational heterogeneity in their impact on family financial asset allocation.Thirdly,from the perspective of family age,families in the young child-rearing stage,middle-aged and elderly child-rearing stage,and empty nest stage all have higher allocation structures of risk financial assets,with empty nest families having higher allocation structures of risk-free assets and financial product assets.From the perspective of the number of children,families in the one-child child-rearing stage,two-child child-rearing stage,and two-child or more child-rearing stage all have higher allocation structures of risk financial assets,with empty nest families having higher allocation structures of risk assets,financial product assets,and risk-free financial assets.The results of the family life cycle model constructed from the dimensions of family age and the number of children all indicate significant urban-rural,regional,and intergenerational heterogeneity in the impact of the family life cycle on family financial asset allocation.Fourthly,the family life cycle has a significant impact on the structure of family risk financial assets,debt structure,liquidity asset structure,and the balance of family financial asset allocation.Fifthly,medical expenses,education expenses,and housing loans can significantly moderate the impact of the family life cycle on the balance of financial asset allocation.Finally,from the perspective of family age,families in the young child-rearing stage have a significant negative impact on the wealth effect of risk assets and housing wealth effect.Middle-aged and elderly child-rearing families have a significant negative impact on the wealth effect of family risk assets.From the perspective of the number of children,one-child child-rearing families have a significant positive impact on the wealth effect of risk assets.Two-child child-rearing families have a significant positive impact on the wealth effect of housing wealth.This study has four theoretical implications:Firstly,the study theoretically analyzes the family life cycle effect on family financial asset allocation,explains the holding motivation of family financial asset allocation at various stages of the family life cycle,and empirically tests the family life cycle effect on family financial asset allocation,enriching the theoretical research on family finance.Secondly,the study extends the traditional family life cycle model to the child-rearing stage from the perspective of family age and the number of children,further enriching the theoretical model of the family life cycle.In addition,the study,from a dual perspective of family age and the number of children,investigates the impact of the family life cycle on family financial asset allocation and the balance of family financial asset allocation.The research extends the family life cycle theory model and enriches the research on the impact of the family life cycle on family financial asset allocation and the balance of family financial asset allocation.Thirdly,through regional and intergenerational heterogeneity research,the study further refines the research on the heterogeneity of family financial asset allocation.By dividing regions into urban and rural areas and the eastern,central,and western regions,as well as dividing generations,the study explains the differences in family life cycle effects between different regions and generations and their reasons,making marginal contributions to the theoretical research on heterogeneity in family financial asset allocation.Fourth,the study,from the dimensions of family age and the number of children,distinguishes the different impacts of various stages of the family life cycle on the wealth effects of risk financial assets and real estate assets.Simultaneously,the research examines the effects of family financial asset allocation on wealth effects related to education consumption,daily consumption,and cultural and entertainment activities under the influence of family life cycles.This provides a more precise measurement of the influence of different stages of the family life cycle on the wealth effects of family financial asset allocation,making an incremental contribution to the research on the wealth effects of family financial asset allocation.