We use quarterly panel data from the Italian Survey of Consumer Expectations to analyze the relative contribution of idiosyncratic and aggregate risks on household consumption uncertainty. Consumption uncertainty is primarily driven by individual shocks rather than macroeconomic fluctuations. Estimating pass-through coefficients, we find that idiosyncratic risks (particularly those related to health and income) account for 75% of consumption risk, while aggregate risks (particularly GDP and house price fluctuations) contribute less than 20%. Young workers with limited cash reserves face greater exposure due to limited insurance options. Using subjective expectations data and an instrumental variables approach to the Euler equation, we estimate a relative prudence coefficient of 2–3. On average, precautionary savings amount to 2.7% of current consumption, three quarters of this driven by idiosyncratic risks. Only one third of these savings buffer labor income shocks, while the remainders is a response to expenditure shocks. These findings suggest that focusing solely on income risk significantly understates precautionary savings. Consistent with theoretical predictions, precautionary savings are highest among younger individuals and decline with age.

Keywords: Consumption Risk; Income Risk; Health Risk; Aggregate Risk; Precautionary Savings.

JEL: D12, D14, D15, C8, C99