The Connection: Mental Health and Financial Wellbeing
There is a strong connection between mental health and financial wellbeing. Money has impact on far more than just people’s bank accounts – it permeates most areas of their lives. It affects central areas of our happiness and well-being: relationships, health, lifespan, lifestyle, and career. Financial problems often have significant effects in many areas of people’s lives and overall life experiences.
The stress of having too much debt or being financially insecure can have a tremendous impact on an individual’s emotional and physical health. Financial insecurity may include constant reminders of outstanding debt, or more extreme situations such as unknown circumstances regarding your next paycheck, keeping a roof over your head, or feeding yourself and your family.
Understanding the Scope of the Problem
Today, financial problems have reached epidemic proportions, with most people suffering from the impact of long-term financial problems. Half of Americans are considered poor or low-income; two-thirds of the population report that they would have trouble coming up with a thousand dollars for an emergency; and over 3/4 of workers live paycheck-to-paycheck, with the majority of their income going toward debt. We have a serious problem that impacts the majority of us. [1, 2, 3, 4, 5, 6]
78% of workers live paycheck-to-paycheck61% would have trouble accessing $1,000 for an emergency$38,000 Americans average in personal debt (excluding home mortgages)$280 Billion Cost of Financial illiteracy to Americans each year
Mental Health and Financial Wellbeing Research & Data
Seven out of ten American workers say financial worry is their most common cause of stress.
Consumer Financial Protection Bureau
For the majority of Americans (64 percent), money is a somewhat or very significant source of stress, but especially for parents of children below the age of 18 and younger adults (77 percent of parents; 75 percent of Millennials, ages 18 to 35; and 76 percent of Gen Xers, ages 36 to 49).
American Psychological Association
Individuals who have experienced more major financial stressors report greater levels of psychological distress and lower levels of psychological well-being. Mediation analyses also suggested that financial stress may indirectly affect inflammatory activity through decreases in psychological well-being.
Stress not only affects a person’s mental health. It also takes a physical toll on the body. Inflammatory hormones are released when a person is stressed. This increases cardiovascular and cancer risk, among other issues. As a result, the authors pointed out, stress results in “accidents, absenteeism, employee turnover, diminished productivity, and direct medical, legal, and insurance costs” that cost the United States $300 billion every year.
54 percent of respondents say that money is their biggest relationship stressor.
72 percent of Americans reported feeling stressed about money at least some time in the prior month.
American Psychological Association
Research shows that stress induced by poverty can have several detrimental effects on a child’s brain development including atrophy of the hippocampus, the part of the brain responsible for processing emotional memory.
Arthur Dobrin on Psychology Today
Get More Data at: NFEC Research & Advocacy Center
More than Numbers: Real People, Personal Stories
There are personal stories behind the statistics that show the true impact of how mental health and financial wellbeing intersect. For example, read this comment that highlights the toll taken by problematic finances:
“My husband and I work jobs, and yet 30 years later we’re barely getting by. We’ve been struggling for years and it’s gotten more stressful recently. To keep our place, we’ve pulled everything out of our retirement account and still have a lot of credit card debt. The worst is that I’m not able to help pay for our oldest to go to college. I feel like we’ve failed our children and ourselves.”
If you consider that this is a story of a family in an above-average financial situation, you can only imagine how severe the personal impact would be for those already suffering housing and food insecurity.
One Way to Address This Problem: Help People Strengthen Their Finances
NFEC CEO Vince Shorb states, “Because personal finances affect 100% of the population and consequences of financial issues are so severe, this is an issue we as a nation must address. We should address the problem proactively by mandating financial literacy education in schools and also making education available to adults who need help recovering from problems and building their financial foundations.”
The financial literacy standards for training must also be strongly upheld and focus on more than just financial literacy. Training should include methods shown to encourage behavior modification, improve financial sentiment, and help people set up the systems they need to manage their finances better.