Money and mental health in the US: Why systems matter

Doing research on money and mental health problems in the United States can be a lonely endeavour, if you are trying to understand systemic issues. Mental health problems and financial difficulties must be understood and addressed in the context of the broader systems within which people live, but in the US that perspective is still neglected. Mental health is thought of as primarily a biological problem, needing therapy or medication to address symptoms and change behaviour. Because financial problems are seen as a result of people being uneducated or making bad decisions, the solution is supposedly to give them financial literacy training or financial coaching to help them change their behaviour.

Luckily, I work with a research program at Yale University that takes systems seriously. We were recently invited to London by Money and Mental Health to present our research findings, and to spark a conversation about similarities and differences between the two countries. Money and Mental Health’s work has been extremely helpful as we try to change the conversation in the US. We can’t just cut and paste (if only!) but Money and Mental Health reports guide us as we explore the multiple ways in which these problems intersect, and point the way to possible policy reforms to make life easier for people with mental health problems.

We studied a small group of people with serious mental illness for more than a year, learning about their financial issues, and helping them with advice and support when we could. Close to half of them were unbanked, though all except one had had a bank account at some point in the past. Many had opted out of banking due to high fees, or had been forced to close accounts that they’d been unable to pull out of the red. A typical overdraft fee is $35, and many banks charge additional daily fees while an account remains in the red. Unlike the UK, there are few options for overdraft-free accounts, though the BankOn movement is working hard to change that.

Given high bank fees, many people choose to use prepaid cards instead, and there are tons to choose from. But card fees can also be high and hard to understand, and using them means there’s no chance of developing a relationship with a financial institution that may give you a loan one day. Instead you have to use the very costly non-bank lending sector. Almost everyone we worked with was in some type of debt, ranging from tens of thousands of dollars in credit card debt to much smaller loans from loan sharks or relatives. Whatever type of debt, it makes people unhappy and anxious.

People are not only anxious about debt, but also about their credit scores, which matter more in the US than in the UK. If you have a low score, due either to never having been in debt before, or having fallen behind on payments, it not only makes it harder to get affordable loans. Employers and landlords routinely check credit before deciding whether to employ someone, or rent them an apartment. Another reason it’s so important to have credit is that you might have to pay for medical care. Very poor people can usually get free care, but people who are poor, but not that poor, can be charged thousands of dollars for care. Often a credit card is the only way to pay.

Another problem in the US arises from the very strict disability benefit rules around earning income and saving money. People on the most basic benefits risk cuts to their income if they earn anything over $20, and lose their benefits entirely if they have more than $2,000 in savings. The benefits system itself discourages sensible financial behaviour.

An area where the United States seems to be better developed than the UK is managing situations where people with mental health problems are facing such serious financial problems that they need someone else to take control of their finances. In the UK it’s really difficult to make this happen, but not so in the US. People on disability benefits can be assigned a representative payee, who receives their benefits, pays their rent and bills, then distributes any remaining funds as pocket money. In fact, some would argue that the US may be too developed in this area. While having a payee can make a big difference to someone’s financial stability, removing financial control seriously impinges on their rights, and can negatively affect their recovery. More than 20% of the more than 13 million adults receiving disability benefits have a payee, which is a pretty large number of people who essentially have been consigned to having no control over their financial lives.