- If you’re struggling to get through the day, planning for your financial future can be difficult.
- Here’s how stress affects employees and what financial professionals can do about it.
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More than a year after inflation hit a new 40-year high, workers’ biggest financial concern is still keeping up with rising costs, according to a new report from Telus Health.
These money woes may be linked to mental health, according to the health technology services company.
“There’s a lot of conversation about mental health right now, as there should be,” said Paula Allen, global research and customer insights leader for Telus Health.
“But you can’t have a proper mental health strategy without really thinking about financial well-being,” Allen said.
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Telus measures both financial well-being and mental health with the indices it has developed.
The company’s latest results for September show that workers’ financial well-being score fell to 65.9 in September from 66.7 last measured in February; This represents the lowest score since the index was launched in January 2021.
Meanwhile, the mental health score dropped to 69.7 in September, a decrease of 1.4 points compared to August.
Financial well-being is “hugely predictive of people’s mental health,” Allen said.
People who are feeling more financial stress are not alone. Unfortunately, this is a common sentiment. Lately CNBC Your Money Survey It turns out that 74% of Americans are financially stressed; This rate is higher than 70% in April.
Academic research has also highlighted the link between mental health and retirement savings.
People with anxiety and depression are almost 25 percent less likely to have a retirement savings account. 2017 survey It was published by experts from Cornell University and the Medica Research Institute.
Additionally, the study found that people experiencing psychological distress had up to 67% lower retirement savings as a share of their total financial assets compared to people without these psychological symptoms.
Admittedly, it can be difficult to determine whether mental health conditions lead to worse financial outcomes or vice versa.
“There has been a lot of research over many years that financial distress is associated with anxiety and 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 Advisory Council.
He said people experiencing anxiety may be more inclined to put money aside, as we’ve seen with the Covid-19 pandemic leading to higher savings rates.
“The opposite is also true,” Klontz said; Someone who is depressed may be less likely to plan for a positive financial future.
Saving for a long-term goal like retirement is difficult for everyone, he said, because of instincts that naturally make our thinking more narrow-minded.
“You need to overcome the instinctive desire to consume now rather than save for the future,” Klontz said.
Research from Telus Health points to strong relationships between financial preparedness and mental health.
The company found that employees 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. Likewise, those with the worst mental health and financial well-being scores did not know how much they would need.
Additionally, the research found that the lowest mental health and financial well-being scores were among workers who were worried they wouldn’t be able to retire.
Whether workers have emergency savings is another factor that leads 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.
He said the lack of cash support could lead to higher levels of vulnerability or anxiety, regardless of income.
Regardless of employer benefits, there are steps employees can take to improve their financial and mental health, such as paying off high-interest credit card debt and putting away money for emergency savings, Allen said.
He also said all employees will benefit from understanding the benefits available to them and taking advantage of those offerings, including those related to mental or financial health.
Klontz’s research found that workers can begin to change their perspective by developing a “really exciting vision” of why they’re saving in the first place.
“You have to have a strong sense of commitment to that goal to take action because you’re asking yourself to do something that we’re not ready to do,” Klontz said.
If you’re focusing on retirement, ask yourself what this phase of life means to you, who you’ll spend time with, what you’ll do, and how the experience feels.
The clearer your vision, the more likely you’ll be to take steps to achieve your goal, Klontz said.
Similarly, if your focus is on building emergency savings, you can visualize the feeling of safety and security that setting aside extra money will bring.