The Impact of Financial Stress on Mental Health

Every May, we recognize Mental Health Awareness Month—a time to raise visibility and address the challenges faced by millions of Americans living with mental health conditions. It's also an opportunity to examine some of the triggers that exacerbate mental illness, such as financial difficulties. It should come as no surprise that studies consistently show money worries are a common contributor to anxiety, insomnia, and depression. With the current economic climate, including a possible recession, stock market volatility, and employment insecurity, it's no wonder many people are worried.

Links Between Finances and Mental Health

• A study by the American Psychological Foundation showed that 66% of Americans said money was a significant source of stress.

• (74%) of Millennials said they are at least somewhat stressed about managing their finances.

• People with the lowest incomes in a given area are 1.5 to 3 times as likely to experience mental health issues, like depression and anxiety, as high-income people in the same location.

But here's the good news: taking control of your finances—even in small ways—can significantly reduce stress and anxiety.

Financial uncertainty often triggers a 'fight or flight' response in our brains. Without a sense of control, our nervous system remains on high alert. However, when we take steps to manage our finances, this mental load lightens, and our outlook improves, bringing a sense of relief and hope for the future.

Why Financial Control Matters

• People with a financial plan are 2x more likely to report no anxiety or depression compared to those without one.

• Those who track their spending and set financial goals report higher life satisfaction and lower emotional distress (FINRA Foundation).

• Financial knowledge matters. Respondents with higher financial literacy (scoring above the median on a seven-question financial literacy quiz) were likelier to be financially stable than those with lower financial literacy, empowering them to make confident and informed financial decisions.

Small Steps That Make a Big Difference

You don't need to become a financial expert tomorrow. You just need to start taking steps:

1. Create a Budget and track your spending

Budgeting isn't about restrictions but rather clarity and making more informed choices. Tracking where your money goes helps prevent financial surprises.

2. Build an Emergency Fund

Even a small amount in savings can reduce the stress of unexpected expenses and help you sleep better, knowing that you have a small safety net. You can start saving without dramatically changing your lifestyle. Just buy fewer lattes per week or eliminate those subscriptions you don’t use anymore.

3. Set Achievable Goals

Set a goal of saving $20 weekly or paying down one credit card. Making small changes builds confidence and momentum toward larger aspirations.

5. Get financial literacy tools for Free

The National Bankers Association provides a free financial wellness platform, and you can sign up for free today. It has budgeting tools, teaches you how to improve your credit score, learn to pay down debt, and much more!

Reclaiming Your Mental Health

When you manage your finances proactively, you free up mental bandwidth for other parts of life, like relationships and creativity. You sleep better, make clearer decisions, and feel more in control of your future; it just makes financial “sense”.

To learn more about the National Bankers Association, click here.