Abstract
Do households that can count on help from relatives or friends in an emergency take more financial risk? This help appears neither on the household’s balance sheet nor in data on transfers until it is used, yet it can matter before any money changes hands. Using survey data from 20 European countries on whether households could raise a fixed emergency sum from relatives or friends, I show that households with this family backstop are more likely to report receiving help when they ask for it, and that they take more financial risk. They are 35 percent more likely to hold shares or equity funds, and the relative difference is largest for households with few deposits. In a calibrated participation-cost model, the backstop makes households more willing to bear risk with their savings and accounts for part of the participation gap. The size of this effect depends far more on how reliably help arrives than on how much help is available.