Mental health: Its effect on financial well-being

There’s been a long-term link between financial difficulties and poor mental health. Fortunately, help is available – and as part of World Mental Health Day on 10th October, we’ll go through the support available as well as discussing the connection between mental health and financial well-being.


  • There’s a clear link between financial difficulties and poor mental health, both of which haven’t been helped by the pandemic.
  • Stressful events, such as redundancy or dealing with a loved one’s will after a bereavement, can trigger mental health problems. It’s important to build an appropriate support network including family and friends, GPs, advice services and financial coaches.
  • Financial advisers are here to help and can offer guidance on the support available for vulnerable people, as well as advice and planning when circumstances change.

Intrinsic links

The pandemic has shown us many things – including even more evidence of the clear link between our money and our mental health. Many people have suffered from the pandemic, either directly or indirectly, and while many ended up saving money as spending opportunities became scarce, many more lost their jobs and saw their incomes reduced.

According to research conducted by the National Centre for Social Research (NatCen),1 and perhaps unsurprisingly, those who experienced a sudden and significant drop in their household income also suffered the sharpest increases in mental illness.

Cause and effect 

The Money and Mental Health Policy Institute have also found that almost half of people in problem debt also have a mental health problem – 86% of respondents to its survey of nearly 5,500 people with experience of mental health problems said their financial situation had made these problems worse.2

There’s also research to show that people with mental health problems were likely to be hit harder by any loss of income due to the pandemic and were more exposed to financial hardship.3

According to a 2020 survey by the Financial Conduct Authority (FCA),4 42% of adults with poor mental health, low mental capacity or cognitive difficulties find dealing with customer services on the phone confusing or difficult, making it harder to manage their finances effectively.

And when shopping around for financial products and services, just over a third are anxious; a third also put off dealing with financial matters, such as ignoring warning letters, and 29% had fallen into debt because they did not want to deal with difficult financial situations.

Breaking it down 

Harriet Shepherd, Workplace Financial Education Project Manager at St. James’s Place, points out that it’s common for financial difficulties to arise from emotionally challenging life events. “People need to be aware that money issues can be a trigger,” she says.

“The main financial events in your life are often linked to personal circumstances and have an emotional connection. They are often things that will only happen once or twice in your life, such as buying a house, dealing with a close family bereavement, and having to work on wills and probate.”

It’s not surprising that these situations are often stressful and complex, given that it’s likely to be an issue people haven’t dealt with before. “No one’s prepared for this stuff the first time around,” she adds. “That’s why it’s vital to have a team to help you with it.”

“It’s worth knowing what that team would look like before anything happens, so you know who to call on when you need to.”

Peace of mind 

Along with official forms of support, your team may also include friends and family members. If debt is an issue, free advice services such as StepChange Debt Charity and Citizens Advice can be helpful, while The Money and Pensions Service offers valuable, free and impartial guidance and information.

Medical professionals such as GPs, counsellors and psychotherapists are also likely to play an important role in helping you deal with mental health difficulties and challenging life events. If you are unsure where to look, you can find a local counsellor on the British Association for Counselling and Psychotherapy website or at Counselling Directory. Local services may also offer access to free or affordable counselling – your GP will usually have details of these.

Working with a financial coach could also be something to consider if day-to-day money management is an issue. Furthermore, a traditional financial adviser can provide planning and advice services and help you to focus on dealing with whatever you’re going through in life.

Some advisers are even qualified as coaches to help with issues around money and mental health, and a number of firms provide resources for advisers working with clients they identify as being vulnerable.

“When considering clients in vulnerable circumstances, there are four key drivers: health, life events, financial resilience and capability,” says Edward Grant, Director of Technical Connection at St. James’s Place. He adds that the emphasis is on ensuring the most appropriate and relevant assistance is available to clients.

“We have a dedicated Vulnerability and Client Assistance Manager who runs clinics and leads discussions on a specific client’s needs or general support areas,” explains Grant. “We have also developed a series of fact sheets, videos and guidance on the key vulnerable circumstances.”

Advisers can also signpost clients to relevant charities, such as Mind, StepChange and Cruse Bereavement Care.

“People don’t need to be experts,” says Shepherd. “By taking on some of the practical financial issues, for example, advisers and coaches can give you the space to process what you’re dealing with.”

If you feel you need help navigating your finances during challenging life events, please speak to a Wellesley Adviser.


1 Finances and mental health during the COVID-19 pandemic, NatCen, April 2021

2 Money and mental health: the facts, Money & Mental Health Policy Institute, 2019, derived from a UK-wide of 5,500 people with lived experience of mental-health problems

3 Income in crisis, Money & Mental Health Policy Institute, June 2020, based on a nationally representative poll of 2,096 people aged 18 and over

4 Financial Lives 2020 survey: the impact of coronavirus, Financial Conduct Authority, February 2021, based on a survey of 16,190 respondents

Back to news