
Conor D’Arcy, Deputy Chief Executive, Money and Mental Health
Savings and mental health - how they’re linked
29 January 2025
- The Financial Inclusion Committee is a new initiative led by the Treasury to support people in vulnerable circumstances to get better access to banking, affordable credit and savings – and mental health is one of the cross-cutting themes of the Committee’s work.
- Those of us with mental health problems are less likely to have a good level of savings – making it tougher to deal with unexpected financial problems or to take time off work.
- There is plenty that the government, through the work of the Financial Inclusion Committee, can do to better support people with mental health problems who are struggling to save. And there’s a role for regulators, banks and employers in supporting people to save well too.
Someone recently asked me what I was most looking forward to in 2025. Beyond Liverpool’s inevitable march to the title, I said I was genuinely excited about the Financial Inclusion Committee. It’s an initiative being led by the Treasury to support people in vulnerable circumstances to get better access to banking, affordable credit and more.
Unlike the sure thing that is the Premier League trophy returning to Anfield, there’s inevitable uncertainty when it comes to any government initiative – mainly, will it deliver what it promises? As recent events have shown, there’s always the possibility of a change in key personnel, which can knock progress off track. But with the Committee already getting stuck into its work, and some great people involved, including our own Helen Undy, I’m optimistic about what it could mean for people with mental health problems this year and beyond.
One of the big issues it will focus on is savings. The launch press release pointed out that 11.5 million people in the UK have less than £100 in savings. Our research has found people with mental health problems typically have less to fall back on than the rest of the population. With mental health one of the cross-cutting themes of the Committee’s work, here’s a rundown of how our savings can interact with our mental health.
A safety net
When we speak to our Research Community of thousands of people with mental health problems, the importance of savings comes through loud and clear. On the one hand, that’s true for anyone. If you lose your phone or your washing machine breaks down and you can’t afford to replace them, things can get tricky quickly. But for those of us with mental health problems, the relationship can be even thornier.
If your mental health takes a hit and you need some time off work, being able to draw on savings to smooth over a dip in earnings is so valuable. It’s such a common issue that we wrote a whole report about the “too ill to work, too broke not to” trap – employees taking time off work due to their mental health feel forced by their finances to go back before they’re ready, which can lead to a slower recovery. Or maybe you need some support with your mental health more quickly than the NHS waiting list allows – savings can allow you to get help privately.
“My salary is good so I don’t have to worry about money. This helps me feel more optimistic and reduces my anxiety. It means I have savings to fall back on now if I become more unwell. It means I have enough money to pay for counselling which helps me stay well.” Expert by experience
The challenge of building and keeping your savings
But although having a mental health problem can make savings more vital, it can also mean it’s much harder to build up a rainy day fund in the first place. A big reason for that are outcomes in the labour market. Compared to people who don’t have mental health problems, our past research has found that people with mental health problems are:
- less likely to be in work
- working fewer hours when we are in work
- employed in typically lower-paying roles.
Given that, it’s no surprise that people with mental health problems have a typical annual income that’s £2,400 less than people without mental health problems.
Our mental health doesn’t just affect our ability to earn, it can also affect our spending. Increased impulsivity is a common symptom of a number of mental health problems, like bipolar or personality disorders. When we’re unwell, it can lead to us spending more than we can afford to, sometimes blowing through years’ worth of savings in a few hours.
“Mental illness has meant I’ve been unable to work for a long period and burn through savings when manic. Both mean I have to start all over again.” Expert by experience
Struggles with getting the most from your savings
Another common symptom of many conditions is difficulty thinking clearly and making decisions. That can lead to people who do have some money set aside getting stuck on very low interest rates. When you’re struggling to do daily basics, comparing different products and opening a new account can feel immensely difficult and not a priority. But over time the cost of missing out on good deals can rack up.
Our mental health can also affect the way we think about the future. The fear of having to take time off work and the value of easily accessible savings could put people off using fixed-term savings products, investments or contributing to a pension – all of which can leave you better off in the long run. We’ve also heard how people didn’t want to save too much, in case it meant they weren’t entitled to benefits when they needed them.
Recommendations
Savings are often the solution when other things go wrong. For many of the problems raised above, more generous sick pay, shorter waiting lists and more mental health-informed employment support would all help take the pressure off people with little saved up.
But there’s still so much that a range of players can do:
- The government should better publicise and widen participation in the Help to Save scheme
- The FCA should ensure financial services firms are delivering fair value for savers, notifying people when better rates are available and making it easier to switch
- Banks should offer additional tools to help people to stay in control of their finances when they’re unwell
- Employers should offer payroll savings schemes, to make it easier for employees to save.
Time will tell whether my optimism for the Financial Inclusion Committee (and Liverpool) is well-placed, but renewed attention to this issue and the different routes to achieving change do make me hopeful.