4 The household balance sheet

In this section, you’re going to look at the impact buying a home has on a household’s financial security and resilience. You’ll do this by looking at the household balance sheet.

The balance sheet of a household is a record of the household’s stock of different assets (things the household owns) and liabilities (things it owes) at a point in time. Analysing this record in different ways can tell us how well the household may be handling its current financial situation and its ability to manage in future if it is hit by financial shocks, for example, as a result of job loss or a rise in interest rates.

First, though, make sure you’re aware of what is meant when using key terms such as ‘income’, ‘assets’, ‘stocks’ and ‘flows’.