Workers’ biggest financial concern is still keeping up with rising costs, more than one year after inflation peaked at a new 40-year high, according to a new report from Telus Health.
Those money woes may have a connection to mental health, according to the health technology services company.
“There’s a lot of talk right now about mental health, as there should be,” said Paula Allen, global leader of research and client insights at Telus Health.
“But you really can’t have a proper mental health strategy without really thinking about financial well-being,” Allen said.
Telus measures both financial well-being and mental health with indexes it has developed.
The company’s latest results for September show the financial well-being score of workers fell to 65.9 in September, down from 66.7 when it was last measured in February, representing the lowest score since the index was launched in January 2021.
Meanwhile, the mental health score fell to 69.7 in September, a 1.4 point drop from August.
Financial well being is “very predictive of people’s mental health,” Allen said.
Financial strain associated with anxiety, depression
Academic research has also highlighted a connection between mental health and retirement savings.
People with anxiety and depression are almost 25% less likely to have a retirement savings account, according to 2017 research published by experts from Cornell University and Medica Research Institute.
Moreover, people with psychological distress had retirement savings up to 67% lower as a share over their overall financial assets compared to people without those psychological symptoms, the research found.
Admittedly, it may be difficult to identify whether mental health conditions lead to poorer financial outcomes, or vice versa.
“There’s been a lot of research for many years that financial strain is associated with anxiety, depression,” said psychologist Brad Klontz, a certified financial planner and expert in financial psychology and behavioral finance. Klontz is also a member of the CNBC Advisor Council.
People who are experiencing anxiety may be more inclined to set aside money, as we saw when the Covid-19 pandemic prompted higher savings rates, he said.
“It works the other way, too,” Klontz said, in that someone with depression may be less likely to plan for a positive financial future.
Accumulating money toward a long-term goal like retirement is difficult for everyone, he said, due to instincts that naturally make our thinking more short-sighted.
“You have to overcome that instinctual desire to consume now versus to save for the future,” Klontz said.
The research from Telus Health points to strong relationships between financial preparedness and mental health.
Workers with the best financial well-being and mental health scores know how much retirement savings they will need to maintain the standard of living they want, the company found. Likewise, those who had the worst mental health and financial well-being scores did not know how much they will need.
Moreover, the lowest mental health and financial well-being scores were among workers who are concerned they will not be able to retire, the research found.
Emergency savings can affect mental health
Whether workers have emergency savings set aside was another factor that led to higher or lower mental health scores, Telus Health found.
“Not having emergency savings was one of the biggest factors in terms of people’s mental health,” Allen said.
Not having a cash cushion set aside may prompt a higher level of vulnerability or anxiety, regardless of income, she said.
These mental exercises may help change your outlook
Regardless of the benefits an employer provides, there are steps that employees can take to improve their financial and mental health, like paying down high interest credit card debt and accumulating money towards emergency savings, Allen said.
Moreover, all employees would benefit from understanding the benefits available to them and taking advantage of those offerings, including those related to mental or financial health, she said.
Klontz’s research has found workers may start to change their outlook by first developing a “really exciting vision” of why they are saving.
“You have to have strong emotion attached to that goal in order to take action because you’re asking yourself to do something that we’re just not wired to do,” Klontz said.
If you’re focusing on retirement, ask yourself what that phase of life means to you, who you will spend time with, what you will do and how that experience feels.
The clearer your vision, the more likely you will be to take steps to achieve your goal, Klontz said.
Likewise, if your focus is building emergency savings, you may envision the feeling of safety and security that having extra money set aside may bring.