Money’s Impact on Mental Health

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What does financial health have to do with mental health? Plenty. Even in so-called stable economic times, the impact of standards of living on the well-being of individuals, families and society in aggregate is profound and far-reaching. Given our current financial stressors, such as inflation, income/wealth disparities, housing market woes, a whiplashing stock market and the rest, these impacts are on full display. Here are some ways financial and mental health interconnect:

  • Money is the number one flash point in marital conflict. It’s unusual for couples to remain on good terms while their finances are in bad shape. In working with couples, I frequently witness this verbal tug of war over family monetary policy.
  • Well-being is most closely correlated with middle to upper middle-class status, rather than being poor, economically stressed or, somewhat surprisingly, affluent. Financial security without excess appears most supportive of sound mental health.
  • Money and life satisfaction are correlated, but not how we might expect. If one is poor, having more money does increase contentment and peace of mind. However, if one is rich, additional funds have little impact on satisfaction with one’s life. Once our fundamental economic needs are met, there’s little happiness to gain from more largesse. 
  •  For many, having a job that pays a living wage contributes substantially to self-esteem. Inversely, job loss or under-employment deflates self-worth and is associated with emotional distress; in some cases, even self-destructive behavior.
  • Financial worry causes stress, unhealthy self-medicating, sleep disturbances and declining life satisfaction. Particularly when someone is working as hard as they can but still unable to make ends meet, this stress becomes chronic and corrosive.

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During our most recent financial hiccups, mental health providers report dramatic upticks in financially induced anger, anxiety, marital discord and substance abuse. In part, these factors may be fueling the soaring rates of anxiety and depression since the onset of the pandemic. The toxic formula here involves combining a high sense of responsibility (“I have to provide for myself and my family”) with a low degree of control (“Hard as I try, I can’t get my head above water”)—a classic prescription for chronic stress.

Why is wealth, or its absence, so intertwined with mental wellness? Well, as behavioral economists remind us, money is laden with emotional meaning. Which leads us to Maslow’s Hierarchy, a longstanding model of fundamental life needs, generally depicted in the following pyramid:

The bottom two rungs—physiological and safety—are heavily influenced by one’s socio-economic status. The next two—love/belonging and esteem—can also be affected by money. If our basic needs are undermined by financial uncertainty, we enter survival mode, an inherently stressful juxtaposition to occupy for any length of time. Add to this the mental discomfort many experience when faced with uncertainty (“What happens if I can’t make ends meet?” or “I’m living hand to mouth with no emergency fund”), and the emotional impact becomes clear.

This latter mindset, which we call “intolerance of uncertainty,” is particularly wearing on those who have little or no savings to back them up when an unanticipated expense arrives. Given that 26% of us have no emergency fund at all and that only 23% possess sufficient funds to cover their living expenses for half a year, large swaths of the populace experience income insecurity. 

Still, the impacts extend beyond security alone. Choices about relationships and life partners can be influenced by socio-economic status. And, as previously noted, even self-worth is affected. Some of us label ourselves a success or failure based in no small part on our financial circumstances. Sadly, certain folks even choose suicide in response to money problems. In short, the influences of money on mental well-being prove pervasive and powerful.  

This is born out in the World Happiness Report. Those nations with the strongest financial safety nets and the least wealth inequality also demonstrate the highest levels of life satisfaction. Meaning there’s no individual “therapy” for the angst created by money woes. Rather, this is a societal issue, one that can only be addressed by making sure those with less have more. Not capitalism’s strong suit. Want to improve our nation’s collective mental health? Heed these words from Franklin D. Roosevelt:

“The test of our progress is not whether we add more to the abundance of those who have much. It is whether we provide enough for those who have too little.”

For more, visit philipchard.com.