How have COVID-19 and the cost of living impacted peoples mental health and financial wellbeing
Since the COVID-19 pandemic, and amidst the recent and ongoing rises in the cost of living, mental health and financial wellbeing have become a concern. About 1 in 4 individuals faced initial mental health issues during COVID-19, and the pandemic worsened some existing problems, particularly for lower-income groups, those with underlying health issues, and those of mixed ethnicity. Financially vulnerable people saw greater debt and payment defaults, and cost of living increases continue to exacerbate matters, intensifying anxiety, depression, and stress due to financial struggles, especially for those in debt.
Context:
Over the past 5 years, data has shown an increase in the prevalence of people experiencing mental health problems. Evidence has shown that those with mental health problems are less confident managing their finances, and less financially resilient.
Since COVID-19, increasing cost of living pressures have continued to affect people’s mental health and financial wellbeing.
This review brings together evidence on what we know about: 1) how COVID-19 has affected people’s mental health and finances; and 2) how the current cost of living situation is affecting people’s mental health and finances.
How has COVID-19 affected people’s mental health and finances?
We know that COVID-19 impacted people in different ways. Some of these were driven by macroeconomic factors, such as when the redundancy rate spiked to a record high of 14.2% in 2020,1 with knock on effects for people’s financial situation and mental health. Other social factors such as lockdowns and social distancing also impacted people’s mental health.
Mental health and COVID-19
- The prevalence of mental health problems increased during COVID-19.
- 1 in 4 people experienced a mental health problem for the first time during COVID-19.2
- More people reported mental health challenges since 2018 – 21% to 30%.3
- COVID-19 may have exacerbated existing mental health challenges for some groups of UK adults.
- Since June 2020 there has been an overall increase in anxiety across the UK, and this is more likely for: those on lower incomes, females, those with underlying health conditions, and those of mixed ethnicity.4
Finances and COVID-19
- Many people in already precarious financial circumstances experienced a further decline in their situation.
- UK Adults have more debt than they did before the pandemic, and those with the least manageable debts were more likely to have increased what they owe.5
- People with mental health problems were more likely to have been behind on at least one payment than those without, and to have missed three or more payments, during COVID-19.6
- Evidence shows that those experiencing mental health challenges struggled to keep up, and fell behind on bills and credit commitments – and more so than those who were not experiencing mental health challenges.7
How is the cost of living affecting people’s mental health and finances?
The current cost of living situation has been found to have exacerbated financial and mental health challenges.8 The impact varies by characteristics of the individual and the type of mental health challenge(s) they might be facing.
Mental health and the cost of living
- The prevalence of mental health problems may be on the rise.
- Polling from 2022 shows that the number of people feeling anxious, depressed and unable to cope is rising as a result of the cost of living increases.9
- People are struggling with their mental health in relation to financial concerns.
- These feelings can materialise as anxiety, depression, stress and hopelessness in their own financial circumstances.10
- Those in debt are more likely to experience suicidal thoughts or feelings.11
- Those who are behind on multiple bills are also more likely to have had suicidal thoughts due to the cost of living.12
- Those already struggling to pay their energy bills are more likely to have depression.13
- Younger people with mental health problems are more likely to feel anxious as a result of their financial situation.14
- People with mental health problems are struggling financially:
- They are three times more likely to be behind on a payment or bill.15
- Those with moderate to severe depressive symptoms are spending less on food shopping and essentials, and are using support from charities and foodbanks more, than those with no or mild depressive symptoms. Over half of those with moderate to severe depressive symptoms reported being unable to cover an unexpected expense of £850.16
Finances and the cost of living:
- Evidence from the past year shows that households are struggling.
- More are reporting serious financial difficulty, feeling less secure, and reporting a material impact of the increasing cost of living on their quality of life.17
- The energy crisis is affecting vulnerable adults, with more people in 2022 unable to top up their prepayment meters than in all of the previous 10 years combined.18
- Women experiencing mental health challenges are more likely than men to report financial difficulties (such such as meeting everyday payments, cutting back and reducing saving) as a consequence of the cost of living.19
What next?
Did you find this review helpful? We would like to know what you think. Please contact us at [email protected] with your feedback, and any suggestions for further research or evaluation that should be included in future updates.
Acknowledgements
We would like to thank the Centre for Personal Financial Wellbeing at Aston University for their contributions to our thematic reviews within the mental health space.
Bibliography
Aston University, ‘Money and Mental Health Rapid Evidence Review’, July 2023
Money and Mental Health Policy Institute, ‘Through the lens: Age, money and mental health’, December 2022
Money and Mental Health Policy Institute, ‘Bombarded: reducing the psychological harm caused by the cost of living crisis’ December 2022
Office for National Statistics, ‘Coronavirus and redundancies in the UK labour market: September to November 2020’
Public Health England, ‘Wider Impacts of COVID-19 on Health (WICH) monitoring tool’
Office for National Statistics, ‘Cost of living and depression in adults, Great Britain: 29 September to 23 October 2022’
