Stress and anxiety are major contributors to poor mental health. Since 2011 stress has been the leading cause of long-term sickness absence, while in 2018, it was officially declared by the Health & Safety Executive as causing more depression/anxiety in the workplace than musculoskeletal conditions.
Such is the impact of stress on mental wellbeing that a new ISO standard (ISO 45003) is due out this year, which urges employers to tackle the so-called ‘psychosocial’ risks of the workplace [such as poor job design causing overworking/burn-out].
But what workplace academics are now increasingly realising is the very great link between financial wellbeing and stress, and therefore the impact poor financial wellbeing has on overall mental wellbeing.
There are several indicators that experts say are substantiating this finding:
Financial anxiety equates to poor mental wellbeing
In recent years, behavioural scientists have unequivocally linked instances of financial anxiety with having a damaging contribution to people’s overall mental wellbeing – the impacts of which can last for several years. A US study in 2019 found more than half of Americans lose sleep at night due to having financial worries.
Unexpected expenses, in particular, have been found to cause stress levels that reach dangerous levels. In fact researchers at the University of Georgia have found that suffering serious financial penury, combined with it causing stress at the time, can result in physical health problems many decades later.
Simplistically, when people suffer stress, their ‘flight or flight’ parasympathetic nervous system is always ‘on’. This means they are triggering a cascade of stress hormones that cause real physiological changes. Unfortunately, the body can overreact to stressors, creating long-term effects on physical and psychological health.
Employees in worse financial situations report worse mental health
Back in 2017 Willis Towers Watson revealed only 43% of staff were satisfied with their financial situation, and since the pandemic (which has seen millions furloughed and many others on reduced salaries), the numbers worrying about money have spiralled.
In recent research released to coincide with World Mental Health Day, it was revealed 9.5 million adults claim to have suffered from mental health issues as a result of financial anxiety. Half of these people worry about the day-to-day issue of making ends meet.
Those still unconvinced about the link between pay and mental health should be left in no doubt by data from statistics from a recent ‘Thriving at Work’ report [PDF], which was categorical in its findings: amongst staff that describe themselves as “financially comfortable,” 41% report signs of poor mental health. But this figure rises to 51% for those describing themselves as “just about managing,” and 67% for those in “financial difficulty.”
Poor financial wellbeing links to poor financial decision-making
When people have limited resources it’s scientifically proven that they adopt a ‘scarcity mindset’ – whereby all attention is directed solely on how to get through the week/month.
This means people with poor financial wellbeing have a harder time making decisions that involve long-term thinking, which is key to financial planning and thriving.
What this means is: poor financial wellbeing can be self-sustaining if employees don’t have access to the right tools and this situation can contribute to poor mental wellbeing over time and long-term stress.
Poor financial wellbeing affects interpersonal bonds
It’s not surprising, but poor financial wellbeing is isolating. A Gallup study found that those suffering from poor financial wellbeing rated their relationships more weakly. This may be for one of many reasons, such as the scarcity mindset reducing levels of oxytocin (the bonding hormone) in the brain.
What’s important is that strong relationships are very important to strong mental wellbeing, meaning that focusing on building financial wellbeing can help maintain good mental health over time.
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Poor financial wellbeing makes us less effective at work
The Dutch National Institute for Budgeting Advice found that staff with financial stress are 20% less focused and productive at work and take on average seven extra sick days annually. Feeling good at your job contributes to positive mental health and anything that undermines both your actual performance and perception of performance can affect mental wellbeing. If reduced focus and productivity lead to negative consequences, this can further impact mental wellbeing.
Additionally, amongst the 40% of people who now say they are worried about money, these people demonstrate that they are 760% more likely not to finish daily tasks, 600% more likely to produce lower quality of work and are 220% more likely to be looking for a new job.
In addition, those with poor financial wellbeing exhibit more presenteeism (there in body, but not in mind); the quality of their work suffers, and they are more likely to leave. Increased attrition data can be an indicator of poor financial resilience as staff seek better financial support at another employer.
Mental health and financial wellbeing: why the right tools are critical
Now that’s it’s firmly established that poor financial wellbeing directly correlates to poor mental wellbeing, it will only become more important that employers deduce more directly the state of their employees’ resilience to financial shocks.
And as with mental wellbeing, it’s important that employers provide the tools that enable employees to build their own financial resilience and tackle the root causes of poor financial wellbeing. When employers know this, the support they can offer can be much more targeted.
Your next step: measuring financial wellbeing and mental health
Find out how you can better measure financial wellbeing in the workplace – many of the measures are also used to measure mental health.
The best option is to take an empirical approach, to anonymously ask staff questions specifically about their financial literacy, or their resilience (or not) to sudden financial demands.
Wagestream has developed a specific financial wellbeing survey comprising 17 separate questions validated by behavioural insights experts, designed to get an overall view of an individual’s financial wellbeing. The tool includes evidence-based baselines so that employers can get a sense of how their employees are faring against the general population.