Merlyn Holkar, Research Assistant, Money and Mental Health

Seeing through the fog

Mental health and financial capability


We know that people with mental health problems are three times as likely to be in problem debt as those without, but until recently it has been less clear precisely why this is the case. It’s well-known that people with a mental health problem are much more likely to be living on a low income. But today we are releasing “Seeing through the fog”, a new report that fits another vital piece into the puzzle. The report looks at mental health and financial capability, and calls for banks to step up and help consumers beat this unfair disadvantage.


“It’s like trying to see through a thick fog, with a black bag over your head, whilst wearing ear muffs.”


What is financial capability?

Financial capability is a measure of how good we are at managing our money, however much we might have. A very rich person may have poor financial capability, they might lack the skills necessary for good financial management and spend their money at an unsustainable rate. Equally, somebody on a low income might be highly financially capable, they might know how to shop around to get the best deals and make a habit of saving for a rainy day.

The standard way financial capability is measured is through a “framework” established in 2014 by The Money Advice Service. It’s a detailed model of the different factors that determine a person’s financial proficiency. It includes internal factors, such as a person’s skills, knowledge and attitude, as well as external factors, such as social influences, that all combine to shape that person’s financial decision making.


So what’s the problem?

Back in June last year we surveyed nearly 5,500 people with mental health problems, asking them how their mental health affects their financial situation. People consistently told us that their mental health problems make it harder for them to be a “good consumer” – to spend within their means, pay their bills on time and plan for the future.


“You simply don’t have the head space, or the calm head space to prioritise tasks such as paying bills.”


Three of the key themes were:

  • Higher spending during periods of poor mental health.
  • Psychological barriers which make it harder for people to engage with their financial situation, like not being able to answer the phone or open bills.
  • Impaired cognitive functioning, like difficulties concentrating or memory problems.

The aim of the “Seeing through the fog” research project was to explore these problems in more depth. We wanted to understand which problems are associated with which mental health conditions and to unpack the implications for policymakers and those designing and providing services.


What did we find?


The evidence is clear. Different mental health problems are associated with a wide range of cognitive and psychological problems, which can fundamentally affect a person’s ability to manage their finances.

For example:

  • People with ADHD often have problems concentrating for long periods of time. This can make it harder to deal with complex financial tasks such as constructing a budget or filling out paperwork.
  • A lack of motivation is one of the core symptoms of depression; dealing with money is often just too much to face.
  • People with bipolar disorder are likely to have reduced understanding and problem solving abilities, especially during periods of acute illness. This can make it impossible to be a “good” consumer in a complex marketplace with lots of tariffs and providers to compare.
  • Many people with PTSD have severe memory problems. This can make it harder to keep track of security information, such as PIN numbers or internet banking details, and can lead to expensive mistakes such as missed or late bill payments.


What can be done?

Many banks and other service providers have made great strides in recent years, providing adaptations such as wheelchair accessible branches and textphone and braille statements for people with physical disabilities. “Seeing through the fog” sets out a range of equivalent adjustments that can be implemented to support people with mental health problems to overcome the disadvantages that they often face.

These adjustments include:

  • Budgeting support tools such as jam-jarring, spending nudges and bill reminders to help people who struggle with planning and decision making to stay on top of their day-to-day finances
  • Control options such as double confirmation of large purchases or self-exclusion from online shopping late at night to help people to curb impulsive spending
  • A range of communications options, including online tools such as webchat as well as face-to-face services, to ensure that people with certain phobias or anxiety problems are still able to interact with their bank
  • Alternative verification methods such as voice recognition and biometrics to help people who struggle to remember PIN codes and other security information

One in four of us will experience a mental health condition in any year, so this is not a niche problem: it should be core business. We want to see banks and others stepping up to meet the needs of the significant chunk of their customer-base who are currently left under-served.

Read the full report here