What do we know about how mental health and financial wellbeing are connected?

What do we know about how mental health and financial wellbeing are connected

This review discusses the relationship between mental health and financial wellbeing, showing how each can exacerbate the other. Those with mental health problems often face financial difficulties, while financial struggles can contribute to deteriorating mental health. The interplay is termed a “vicious cycle”, compounded by the double stigma surrounding these issues. Understanding this connection is crucial for addressing the challenges individuals face in both domains.

Context:

Money and mental health are “inextricably linked”.¹ Individuals with mental health problems are more likely to experience financial difficulties, and individuals with financial issues are more likely to experience mental health problems. The two problems feed off one another, which can create a vicious cycle of increasing financial problems, and worsening mental health that is difficult to escape.

This review brings together evidence on what we know about the relationship between mental health and financial wellbeing. It looks at: 1) what sort of difficulties individuals with mental health problems face; and 2) what the relationship between mental health and financial wellbeing looks like.

What sort of financial and non-financial difficulties do those with mental health problems face?

People with mental health difficulties face several challenges.

Financially:

• We know that income is likely a key factor in understanding the relationship between mental health and financial wellbeing, although the nature of the relationship is not fully understood.
  • Those with common mental health conditions earn less than the average UK adult.²
    • However, there is a smaller income gap for those with more serious or long-lasting mental health conditions.³
• There is a relationship between poverty or deprivation, and mental illness, and this is demonstrated by comparing the mental health of: homeowners vs renters; those with savings vs those without; small business owners compared to employed persons.⁴
• People with mental health challenges fare worse across various indicators of financial wellbeing, particularly in terms of credit and debt.
  • Credit: Those with mental health problems are three times more likely to use credit for essentials (food/bills), have more difficulty in keeping up with bills and credit commitments, and are more likely to struggle to pay an unexpected bill.⁵
    • Those experiencing some form of depression are also more likely to be using credit more than usual (cards, loans or overdrafts) compared to those with no or mild symptoms.⁶
  • Debt: Those with mental health problems are four times more likely to need debt advice,⁷ three and a half times more likely to have problem debt (increasing with severity of problem debt).⁸
• Adults with mental health problems are also less likely to save regularly, and also have less savings.⁹
• People experiencing mental health conditions are also less likely to be employed than those without. This gap rises to 28% for those with severe anxiety and depression.¹⁰

Non-financially

• People experiencing symptoms of mental health challenges can also suffer other difficulties, for example: their ability to concentrate, process complex information, solve problems and take action.¹¹
• People may also feel more anxious when thinking about their financial situation.¹²
• Adults with a recent mental health problem report feeling less confident managing their money, and this gap appears to be widening.¹³
• People who experience mental health and financial challenges can go on to experience very serious mental health difficulties, for example evidence points towards a potential pathway from debt to increased risk of suicidality.¹⁴

What does the relationship look like, and what factors are at play?

The relationship between mental health and financial wellbeing is complex. It has been described as “toxic”,¹⁵ a “vicious cycle”¹⁶ and a “downward spiral”¹⁷ with the negative nature being attributed to the double stigma of financial and mental health challenges.¹⁸

The image below helps to visualise the “vicious cycle” where the two forces, mental health and financial wellbeing, aggravate each other reciprocally.

Image source: Money and Mental Health Policy Institute

Another way of visualising the relationship is the double helix model, pictured below. The two strands of the helix represent mental health and financial wellbeing, whilst the forces of social drift and social causation¹⁹ pull or push the strands together or away from each other.

Research highlights two important concepts that are key to understanding the relationship:

• “Individuation of finance”: the concept that financial difficulties are caused by personal failures, and
• “Double stigma”: the perceived negativity associated with facing both mental health and financial challenges.

The two concepts are closely related, and the individuation of finance can be extremely harmful as it reinforces negative feelings of personal blame and inadequacy,²⁰ and feeds into the “double stigma”.

However, overall, the mechanisms by which mental health affects financial wellbeing, and vice versa, are not well understood, and this area needs further interrogation.

What next?

Did you find this review helpful? We would like to know what you think. Please contact us at [email protected] with your feedback, and any suggestions for further research or evaluation that should be included in future updates.

Acknowledgements

We would like to thank the Centre for Personal Financial Wellbeing at Aston University for their contributions to our thematic reviews within the mental health space.

Bibliography

Aston University, ‘Money and Mental Health Rapid Evidence Review’, July 2023
The Money and Pensions Service, ‘Mental Health and Financial Wellbeing’, 2018
The Money and Pensions Service, ‘UK Adult Financial Wellbeing Survey 2021 Mental Health Report’, October 2022
Bond N and Preece G, ‘Not a Secondary Issue: preventing and resolving financial difficulties for people in secondary mental health care’, March 2022
The Money and Pensions Service, Personal Finance Research Centre and the University of Southampton ‘The intersecting impacts of mental ill-health and money problems on the financial wellbeing of people from ethnic minority communities’, January 2023
Heartward Strategic, ‘Money and Mental Health’, August 2022
Office for National Statistics, ‘Cost of living and depression in adults, Great Britain’, September 2022