How the cost-of-living crisis impacts mental health and wellbeing

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How the cost-of-living crisis impacts mental health and wellbeing

Over the course of the last 2 years, one thing has become clear. Many employees across Ireland are struggling with the cost-of-living crisis. A significant number of people in their 30s admit attending a birthday party or wedding would push their budgets to breaking point (Source: MoneyWhizz).

These people are under immense financial stress which has serious health implications, both physical and mental.

Ireland is not unique. Globally, the cost-of-living crisis is prompting calls for employers to offer more financial wellbeing and financial literacy initiatives, or even direct support. For example, in the UK, two out of three UK employees say money worries affect their mental health, while three out of five say financial distress is affecting their performance at work, this is according to a survey by Cushon, a workplace savings provider. Separately, according to a UK government commissioned report, poor mental health, including anxiety, stress, and depression, is estimated to cost employers between £33 billion and £42 billion a year, with an annual cost to the UK economy of between £74 billion and £99 billion.

US insurance giant MetLife has also been a leader in examining the links between financial wellbeing and physical and mental health. In one part of a recent study, it says “…Financial wellness is more important than ever before as it has direct impact on employee’s mental health, as well as their productivity and engagement.  Addressing financial health stressors will be crucial for supporting overall employee well-being and creating resilient employees that can help your company adapt to the challenges ahead.”

Change how we view wellbeing.

We must change how we view the role of workplace supports. We cannot just think of wellbeing without including financial wellbeing in the way supports to employees are considered” said Frank Conway, Founder of MoneyWhizz, the financial wellbeing and literacy initiative. “Everything is linked” he advises.

Inflation impact

With inflation at elevated levels and the ECB still in a rate tightening mode, families across Ireland, including those with variable rate mortgages are under growing financial stress.

The simple fact remains that every day, families across Ireland are seeing the corrosive impact of inflation in their wallets. Dwindling current account balances offer an immediate reminder to people that money is finite. “With less money to go around, this leads to worry, and financial stress,” said Conway.

Price anxiety

In the UK, where there are several studies, more than half of UK adults report feeling anxious about rising prices, while one in five say they feel unable to cope. This is according to the Money and Mental Health Policy Institute, a UK-based think-tank.

Financial stressors

Financial stress can arise due to a variety of reasons, including loss of household income, loss of health or even a relationship breakdown. Inflation is a new arrival and its impact, especially on day-to-day living costs including rising mortgage repayments can be overwhelming.

Many families in Ireland see nowhere near a rise in income that can match the rising cost of goods and services. Many will be relying on savings, or even debt to fill the financial gap that has opened up”. said Conway.

Chicken and egg

It is a chicken and egg situation for people caught in the cost-of-living crisis. People stress about money, they become ill, they miss work, and this puts their earnings capacity at risk” said Mr. Conway, who works with leading employers on a range of financial wellbeing initiatives across Ireland.

Employer role

While it is understandable that employers may be reluctant to take a role in the mental wellbeing of employees, a growing number are taking an active role in aspects of the causes. This includes financial.

Financial wellbeing initiatives cannot be a substitute for poor pay. Clearly, there is no amount of good budgeting practice that can replace the impact of rising prices. But there are many aspects within a well-grounded financial wellbeing programme that can demonstrate coping tactics, financial behaviours, and ways to put income to maximum use.

Eliminating biases

There can also be biases. For example, some people wrongly associate high pay with better financial wellbeing outcomes. But this is not always the case. For example, life events can strike randomly and with devastating consequences. An illness can cause a self-employed person to lose all forms of income. Unless they have a sufficient rainy-day fund built up, or have the right types of insurance, their household could be in real financial difficulty. And this not only impacts them but their partners also who may suddenly find they are under extraordinary financial stress.

In a 2017 study carried out by Rand Europe, for those who did engage with employer financial wellbeing programmes, their mental health improved.

Signposting can help.

It is possible for employers to offer employees a supportive environment. This could be as simple as signposting available supports and resources. In-house events, 1-2-1 financial counselling are just some of the examples that can provide invaluable information to those under financial stress.

It can be easy for the most financially vulnerable to feel isolated and on their own. The reality is that every family will at one time, or another suffer a financial shock” says Conway.

Employers have a lot to gain by making supports available. Financial wellbeing is an important topic to which there are a range of supports that underpin it. In the long term, everybody wins!

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