5 Ways Financial Literacy Impacts Health And Wellbeing

Financial Literacy & Having Healthy Finances Is Good For More Than Just Your Credit Score

Financial Literacy

Financial Literacy & Having Healthy Finances Is Good For More Than Just Your Credit Score

If the ability of an economy’s participants to make well-informed choices about their personal finances forecasts its overall security and stability, then the US economy is increasingly at risk [1]. That is because financial literacy is increasingly scarce in the US. Since 2009, the ability of American adults to correctly answer simple finance questions dropped from 42% of the population to less than 30% [2]. Moreover, 56% of Americans have less than $10,000 in retirement savings, including 23% who have little savings and 33% that have no savings at all [3].

Aside from this lack of future planning, more than two in five American adults also have so little accessible savings that they would be unable to cover an unexpected $400 charge [3]. Additionally, more than one-third of households have credit card debt, and one-quarter of individuals owe an average of greater than $37,000 in student loan debt [34]. This data reflects the current trends of financial products and options becoming increasingly complex and challenging to decipher, and consumers shouldering more of the burden of their financial choices [1].

Financial Health & Financial Literacy Defined

Put simply, financial literacy is knowing and understanding the basics of managing personal finances, with literate consumers tending to make better (healthier, more sustainable) choices about their debt, spending, and savings habits [2].

Financial health is an outcome of financial literacy. Financially literate consumers make choices that yield better financial health, including maintaining lower amounts of personal debt, saving more, and spending a smaller percentage of each paycheck on fixed or non-discretionary expenses [5]. Though there are several different ways to measure financial health, industry experts agree that good financial health is marked by “a steady flow of income, rare changes in expenses, strong returns on investment… and a cash balance that is growing and is on track to continue to grow” [5].

Defining Poor Financial Health

Unhealthy finances yield financial stress and, more specifically for people carrying high levels of debt, debt stress [6]. Given that the majority of American adults display at least one symptom of poor financial health, it is not surprising that more than one-quarter of American adults report feeling financially continuously stressed or near-constantly stressed [7]. What’s more, a lack of savings, unexpected expenses, and the costs of healthcare representing the most significant stressors for the majority of people [8].

Health Consequences Of Financial Literacy

Poor financial literacy causes and contributes to poor mental and physical health [9]. Moreover, it also can create debt spirals and self-sustaining unhealthy financial behaviors [10]. That is, people with low levels of financial literacy tend to fall into spending patterns and accrue debt in ways that force the continuation of unhealthy habits. As a result, low levels of financial literacy cause emotional stress and can also cause and worsen both mental and physical illness.

1.   Low Personal Financial Literacy Increases Emotional Stress

The effects of chronic stress are dramatic and far-reaching. It can suppress and damage immune, sleep, digestive, and other bodily systems [11]. A lack of financial literacy tends to elevate stress levels, and debt spirals and other self-sustaining unhealthy financial habits compound debt stress and financial stressors. The most significant mental health consequences of financial stress are anxiety and depression [12]. What’s more, mental illness is among the most significant barriers to financial literacy, and many people suffering from even mild mental illness note a cyclical relationship between poor financial health and the continuation and worsening of emotional symptoms [9].

2.   People With Poor Financial Health Experience Higher Rates Of Poor Physical Health

People with low levels of financial literacy report having poor physical health more than twice as often as people with high levels of financial literacy [13]. These same people are four times as likely as financially healthy people to experience headaches, depression, and numerous other chronic and acute health conditions like back pain, ulcers, insomnia, heart arrhythmia, and high blood pressure [14]. Moreover, people who experience higher levels of stress due to low financial literacy also maintain poorer control over chronic health conditions like diabetes and high blood pressure, increasing the frequency of severe complications associated with these conditions [15].

3.   Being Financially Unhealthy Is A Barrier To Preventive Care

People with poor financial literacy put off preventive and after-illness care. This includes skipping check-ups and follow-up appointments and also abstaining from preventive behaviors, like exercise [16]. Improving financial literacy is a proven way to reduce cost-related non-adherence to medical regimens [17]. When people with low levels of financial literacy do end up needing care, their condition is often worse (and more expensive) [18]. Moreover, because they do not maintain relationships with primary care practitioners, people with poor financial literacy go to the emergency room more often, which increases the financial cost of (and stress caused by) physical illness [19].

4.   Poor Financial Wellness Is A Predictive Characteristic For High Risk Behavior

Substance abuse, leading a sedentary lifestyle, and poor nutritional choices are among the most devastating high-risk behaviors a person can consistently enact. It is alarming, then, that people experiencing high levels of debt stress due to poor financial health engage in these behaviors at higher rates than the general population [20]. Moreover, multiple studies support the conclusion that low health literacy has a positive correlation with these kinds of high-risk health behaviors [21]. Additionally, people with poor financial literacy also maintain fewer social connections, which can have more significant health consequences than either smoking or high blood pressure [22].

5.   Having Healthy Finances Makes Healthcare More Accessible

One-quarter of Americans delay treatment for their health concerns due to the costs of care [7]. In addition to the costs of care, people whose low levels of financial literacy leads to high levels of financial insecurity (having little to no savings) also find the risks associated with taking time off work to access medical care prohibitive [23]. Moreover, the costs of insurance, traveling to and from appointments, and the higher costs associated with seeking specialized care present additional barriers to accessing adequate care for even mild conditions [24]. Declining accessibility of healthcare in low-income communities compounds these problems.

The Importance Of Improving Financial Literacy

Personal financial literacy, taught as a part of standardized educational curricula in just seventeen states, is becoming more scarce even as it becomes more imperative to people’s emotional and physical health and wellness as well as their financial security and that of the broader national and global economy [2]. The negative consequences of low levels of financial literacy are both profoundly personal and communally shared. Yet the emotional and physical effects of financial instability, though dramatic, are easily preventable. Even minor improvements in financial literacy can have immense positive health, wellness, and quality-of-life outcomes for many people and their families.


  1. https://www.investopedia.com/articles/investing/100615/why-financial-literacy-and-education-so-important.asp
  2. https://www.investmentnews.com/article/20190302/FEATURE/190229936/financial-literacy-an-epic-fail-in-america
  3. https://www.forbes.com/sites/danipascarella/2018/04/03/4-stats-that-reveal-how-badly-america-is-failing-at-financial-literacy/amp/
  4. https://www.nitrocollege.com/research/average-student-loan-debt
  5. https://www.investopedia.com/terms/f/financial-health.asp
  6. https://www.rd.com/advice/saving-money/5-smart-ways-to-reduce-stress-around-personal-debt/
  7. https://www.apa.org/news/press/releases/stress/2014/financial-stress.aspx
  8. https://www.forbes.com/sites/brettwhysel/2018/06/27/3-vicious-cycles/#1fe91f05540d
  9. https://www.debt.org/advice/emotional-effects/
  10. https://pdfs.semanticscholar.org/9d88/45a5f2c952382e44a941d17a98a94fade2c2.pdf
  11. https://www.nimh.nih.gov/health/publications/stress/index.shtml
  12. https://www.ncbi.nlm.nih.gov/pubmed/29505422
  13. http://www.lockton.com/whitepapers/Finding_the_Links_Between_Retirement__Stress__and_Health.pdf
  14. http://www.nbcnews.com/id/25060719/ns/health-mental_health/t/debt-stress-causing-health-problems-poll-finds/#.WylfyadKgWU
  15. https://www.ncbi.nlm.nih.gov/pubmed/27055263
  16. https://www.brit.co/physical-health-connected-to-financial-health/
  17. https://www.ncbi.nlm.nih.gov/pubmed/27055263
  18. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6004829/
  19. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6004829/
  20. https://www.psychologytoday.com/us/blog/what-mentally-strong-people-dont-do/201507/what-your-financial-health-says-about-your-mental
  21. https://www.tandfonline.com/doi/full/10.1080/10810730.2016.1201174
  22. http://ccare.stanford.edu/uncategorized/connectedness-health-the-science-of-social-connection-infographic/
  23. https://www.npr.org/sections/health-shots/2019/05/21/725059882/poll-many-rural-americans-struggle-with-financial-insecurity-access-to-health-ca
  24. https://pnhp.org/news/access-barriers-for-low-income-families/

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