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Money and Mental Health

This blog is part of a collaboration with Anthony Cotter, a finance professional who aims to help people feel comfortable with all things finance and investing. Check out the video that accompanies this blog below, and make sure to visit Anthony's YouTube channel, Anthony Cotter Finance, for more videos like this:

Money and mental health are inextricably linked. 18% of adults with mental health issues are in debt. People with depression who are in debt are 4.2 times more likely to still have depression 18 months later compared to people without financial difficulties. Most worryingly of all, more than 100,000 people in debt attempt suicide each year (Money and Mental Health Policy Institute, 2019). Why are money and mental health so closely connected?

The relationship between money and mental health

The first reason is perhaps obvious. Having enough money is critical to our mental health, because we need to be able to afford basic self-care, for example paying our rent and bills, buying food to eat and having an emergency fund for when life doesn’t go to plan (and if 2020 taught us anything, it’s that life is unpredictable). On top of this, it can be useful to have enough money for ‘fun’ activities, such as TV subscriptions, days out and holidays. If people can’t afford these things, particularly the essentials, it can be stressful and detrimental to mental health, for example if they are having to go without food or are being chased for unpaid bills.

However if we turn this relationship on its head, our mental health can also influence how much money we have. People with mental health issues are less likely to have a steady income, with just 43% of people with mental health issues in employment, versus 74% of the general population, and are overrepresented in low-pay, part-time and temporary work. Mental health issues can also affect peoples’ ability to manage their finances and spending. Research with 5,500 people who had mental health issues showed that during periods of poor mental health 93% spent more money than usual and 92% struggled to make financial decisions. Additionally, people with mental health issues may struggle more with communicating with essential services. 75% of people surveyed reported communication difficulties and 37% reported significant anxiety when dealing with essential services such as banks and energy companies (Money and Mental Health Policy Institute, 2019).

This bidirectional relationship between money and mental health is demonstrated by this flow chart from the Money and Mental Health Policy Institute:

The effect of Covid-19 on money and mental health

The past year (2020) has made the issue of money and mental health infinitely more challenging. Covid-19 has negatively affected many peoples’ financial status and their mental health.

28% of households in England saw a reduction in their income as a result of the pandemic and 20% had depleted their savings (Bank of England, 2020). Median household income was 8% lower, however households in the poorest fifth percentile saw a 15% fall in their monthly earnings (Institute for Fiscal Studies, 2020). Perhaps unsurprisingly, non-payment of bills and mortgages has risen since the start of the pandemic (Institute for Fiscal Studies, 2020), and the number of people claiming unemployment benefits increased by over 100% between March and August 2020 (UK Parliament, 2020), suggesting that many households have been struggling to make ends meet.

The mental health of the UK population deteriorated by 8.1% in the first two months of the pandemic, with young adults and women hit the hardest (Institute for Fiscal Studies, 2020). 69% of adults reported feeling somewhat or very worried about the effect of Covid-19 on their lives in June 2020 (The Health Foundation, 2020). Research predicts that 20% of the population (10 million people) in England will require specialist mental health support following the pandemic, particularly for depression, anxiety, trauma and grief (Centre for Mental Health, 2020). This data paints a stark picture on the current financial and mental health of the nation.

Can money buy happiness?

Clearly, we need enough money to establish and maintain mental health. But is the relationship between money and mental health linear? Or does it reach a plateau once we hit a certain threshold?

Well, Kahneman and Deaton (2010) tried to answer this question. They surveyed 450,000 Americans and found that emotional wellbeing rose with income up to a point, but there was no improvement once people were earning more than $75,000 (about £55,000). They explained this by the idea that once people are earning $75,000 this enables them to do things that improve their wellbeing, such as spend time with people they like, enjoy leisure activities and avoid pain and disease. But when income increases much beyond this figure it may be accompanied by negative effects on wellbeing, such as longer working hours and a reduced ability to savour small pleasures. The graph below shows their findings, with emotional wellbeing measured by ratings on three items the day before the survey: ‘Positive affect’ (i.e. experiencing positive emotions such as happiness, enjoyment and laughter), ‘Not blue’ (i.e. an absence of sadness and worry) and ‘Stress free’ (i.e. an absence of stress).

What can I do if I’m struggling with my money and mental health?

Here are some tips to help you manage your finances if you’re having difficulties with your mental health right now:

- Confide in a trusted friend or family member about your difficulties. They can provide you with emotional and practical support.

- Ask your service providers (e.g. your bank) for more support.

- Schedule some time in your diary to go through your finances. Focus on the high-priority tasks first, e.g. paying bills and rent.

- List all of your income and outgoings, and work out how much you have left over. Then look at where you could cut down on outgoings (e.g. TV subscription services, gym membership you don’t use, takeaways).

- Once you’ve paid off your bills and you have enough money for your day-to-day expenses, start to put aside some money into an emergency fund.

- If you’re struggling with overspending online, try using website blockers and removing auto-fill for credit card details. Perhaps also think about getting rid of your credit cards.

- Prioritise self-care, e.g. getting enough sleep, taking medication, exercising, eating well and avoiding drugs and alcohol.

- Talk to your GP or a therapist for help with your mental health.

For more ideas have a look at the Mental Health and Money Toolkit:


Bank of England. (2020). How has Covid affected household savings? Retrieved from:

Bank of England. (2020). How has Covid-19 affected the finances of UK households? Retrieved from:

Centre for Mental Health (2020). Covid-19 and the nation’s mental health Forecasting needs and risks in the UK: October 2020. Retrieved from:

Institute for Fiscal Studies (2020). The effects of coronavirus on household finances and financial distress. Retrieved from:

Institute for Fiscal Studies (2020). The mental health effects of the first two months of lockdown and social distancing during the Covid-19 pandemic in the UK. Retrieved from:

Khaneman, D., & Deaton, A., (2010). High income improves evaluation of life but not emotional well-being. PNAS, 107(38), 16489–16493. Retrieved from:

Mental Health and Money Advice (2020). Mental Health and Money Toolkit. Retrieved from:

Money and Mental Health Policy Institute. (2019). Money and Mental Health: The Facts. Retrieved from:

The Health Foundation (2020). Emerging evidence on COVID-19’s impact on mental health and health inequalities. Retrieved from:

UK Parliament (2020). Covid-19: Impact on low-income families and social security support. Retrieved from:


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