Katie Evans, Head of Research and Policy, Money and Mental Health

Financial capability week

Why financial capability isn’t just about what you know


Many people across the UK struggle to manage their money. Statistics on the scale of the problem make shocking reading:

  • One in five adults could not read a bank statement.
  • 16 million people have savings of less than £100, meaning something as simple as the washing machine breaking down could put them in serious financial difficulty.
  • 19 million people don’t feel that they have an approach to budgeting that works.
  • Around 8 million people are in problem debt.

Today marks the start of the first national Financial Capability Week, where banks, charities and policy-makers are working together on ways to help consumers understand their finances and manage their money more effectively. Across the week experts will be considering why we should teach children about money in schools, how we can support good financial management through the workplace, and how to tackle problem debt.


The impact on mental health
Improving the financial health of the nation would improve our ability to maintain financial stability through life shocks like the breakdown of a relationship or losing a job. But it goes beyond that. A lack of financial security, whether it’s a not having a cushion of savings to fall back on in an emergency or being in problem debt and receiving constant demands from creditors, has an enormous impact on our wellbeing. And this is particularly pertinent for people experiencing mental health problems, who can find that being in financial difficulty seriously aggravates their condition.


“Although I don’t have any debts, my mental health is affected by the fear of debt. I only have a mortgage but making sure it’s paid is constantly causing me severe stress.”

“I bought my son his first car and insured it, not appreciating that that cleaned out all my savings. This my anxiety increases significantly when I have not enough of a financial cushion.”


Comfort spending
Our emotions drive our spending decisions more than most of us would like to admit. But for many people experiencing mental health problems, our research suggests there are particular problems. 93% of the 5,500 people with experience of mental health problems who responded to our March survey told us that they spend more when they are unwell. Further research has found that, rather than being driven by necessity – for example, spending more on heating because you’re home all day – this spending is often emotionally driven. Many people tell us that, when unwell, they comfort spend, buying things they believe will make them feel better or spend on things, often gifts for other people, to gain approval they believe they lack. While everyone’s mood fluctuates over time, some mental health conditions, like depression, are associated with persistent low mood, and this has a clear impact on financial management.


“My financial situation causes stress every day it’s like a black cloud hanging over me every day. It never goes away.”


The UK’s financial capability strategy focuses on improving people’s ability to manage money, both day-to-day and planning for significant life events like retirement, by boosting skills, understanding of financial products and services and improving attitudes to finances. The latter, however, isn’t just a question of making sure that people realise managing their money is important. If we are to improve our financial wellbeing and break the link between money and mental health problems, it needs to be about developing our understanding of how money affects us emotionally, and how our emotions, in turn, affect our bank balance.


Learning to ask for help
We need to learn to manage our emotions about money as much as we need to learn how to compare interest rates and how much we should save for retirement. Often, our inability to manage the emotional side of financial difficulty prevents us from seeking help, and means the situation becomes much worse than it needed to. The average person in problem debt waits for a year or more before seeking help.


“I could not speak to anyone due to the embarrassment of the debt I had got myself into. I am well-educated and know right from wrong, I was always taught to look after my money and I felt I had let everyone down.”


The emotional difficulties of managing our money don’t just affect people with serious debt problems. A lack of confidence dealing with financial matters means many people avoid making relatively straightforward decisions, like switching bank accounts, which could leave them with more money in their pockets. So much of financial capability isn’t just about being able to do the sums, it’s about feeling confident and having the headspace to engage with things we often think of as complex, scary and difficult.

At Money and Mental Health, we want to make sure that the emotional side of managing our money is always recognised – in the classroom, through NHS services and by financial services providers. Financial difficulty is something we can deal with. But we need to be able to manage our emotions, as well as the maths.