29 October 2019

Research pick: Cooking the books, at home - "Could financial trouble be avoided by cooking at home? An analysis of checking account records"

It seems obvious in retrospect, but researchers in the USA have pinned down the finances to show that families in debt that cook for themselves at home rather than regularly buying fast-food or dining in restaurants could, if they wished to, pay back their short-term, “payday” loans much quicker and perhaps pull themselves out of a cycle of borrowing that often spirals out of control for many people.

Writing in the International Journal of Services, Economics and Management, the team points out that the pricing of fast food and the social implications of the payday loan industry have been investigated individually, but the new study looks at the implications of regular fast food consumption and the cycle of debt. Franziska Willenbuecher of the Center for Public Partnerships and Research, Achievement and Assessment Institute, at the University of Kansas, in Lawrence, together with Marc Anthony Fusaro of the School of Business at Emporia State University, also in Kansas, found no direct statistical correlation between food spending and loan amounts, perhaps suggesting that people do not borrow to buy fast food. However, they did find that households could have saved on average more than 36% of the average debt had they not bought fast food nor eaten restaurant meals for about a month.

The team also showed from their data that almost one in four households could have saved close to a third or more while almost 1 in ten could have saved 70% or more of their loan amount if they had cooked at home.

“The findings of this research demonstrate that fast food, and food spending in general, are part of a larger spending pattern that could best be addressed through financial literacy curricula and public policy in the area of payday loans,” the team writes. The ultimate goal of the research is to determine what leads people to borrow and how the amounts can be reduced if not eliminated. The study represents the first step in revealing the reasons that lower-income households turn to payday loans.

Willenbuecher, F. and Fusaro, M.A. (2019) ‘Could financial trouble be avoided by cooking at home? An analysis of checking account records’, Int. J. Services, Economics and Management, Vol. 10, No. 3, pp.195–207.

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