New Research Shows Positive Link Between Financial Literacy and Health

Protect your mental health by de-stressing finance.


Among the major stressors in life, few can be as intense as budgeting and finance. The Journal of Family and Economic Issues has released new research showing a positive relationship between financial literacy and health. Lacking financial literacy can be harmful to one’s health both through mental stress and lack of access to quality healthcare. Stress itself can cause problems for both mental and physical health problems, which is compounded by the tendency of stressed people to engage in unhealthy behaviors like overeating. If you are always stressed about your financial situation, you are likely engaging in unhealthy behaviors to cope, such as binge eating, drinking alcohol, or seeking excessive distractions through electronic devices.

Optimizing Finances Can Free Up Money for Health

A lack of budgeting skills can make people feel like they never have money for healthy food, gym memberships, and even health care and therapy. Knowing how to budget one’s monthly income and plan regularly-occurring expenditures properly can “free up” money for health-improving expenditures. People who do not budget and allocate money to gym memberships and health insurance before entertainment or travel may find themselves overspending on the latter and not having funds left over to maintain their health. Simply put, budgeting skills can help improve health by causing budgeters to put money toward healthy habits first rather than as an extra.

One major component of health is health insurance, which is often stressful on its own. Those who do not have health insurance tend to suffer more from high medical costs, but trying to understand health insurance – and pick a plan – is confusing and can be stressful. Personal financial literacy can help Americans feel more confident about picking health insurance plans and knowing how they work. Knowing how premiums, deductibles, copays, coinsurance, and networks work can help consumers make optimal healthcare spending choices. Unfortunately, many Americans are in financial distress due to health care problems, and not knowing what the health insurance vocabulary means can result in higher costs.

Over time, another health stressor can be a lack of savings for emergencies and eventual retirement. Generating savings involves careful budgeting and investing, which is also a stressor for those lacking personal financial literacy. Investing is a necessity to build a retirement fund instead of just focusing on savings. However, investing can be confusing to those who have not learned about stocks, bonds, ETFs, mutual funds, or cryptocurrency. Not knowing which investments are tax-advantaged, offer a guaranteed stream of interest income, or are insured by the FDIC can lead to people making unwise choices. Building wealth through planned investments can also directly benefit one’s health by providing a source of funding for medical emergencies and improving one’s quality of life in retirement.

Giving young people access to financial literacy at a young age, preferably in high school, can reduce decades of mental stress by providing peace of mind. It can also set up decades of better health by allowing workers to pick better healthcare options that fit their budget. Failing to require a Personal Financial Literacy class for high school graduation could result in costly financial errors caused by failure to budget, understand health insurance terminology, and understand how common investments work and their risks.

About the Author

Owen Rust

Owen Rust teaches AP Economics and AP Government in Texas, and has also taught Personal Financial Literacy, which Texas high schools must now offer! He has a Master's degree in Finance and Economics from West Texas A&M University and is passionate about young people learning how to take charge of their financial and investing goals. Outside of teaching, Owen is also a writer who writes about politics, government, education, economics, and finance and investing.

Last updated on: November 17, 2022