How Financial Stress Affects Young Adult Mental Health

Stress is a fact of life that affects the old as well as the young. And there’s a lot to be stressed about in today’s world. But for young adults, money is at the top of the list—and financial worries are impacting their mental health.

Young adult financial stress is catalyzed by a variety of reasons, including the rising cost of living, student loan debt, and disruptions in employment due to the pandemic. And their worries about money aren’t just practical. Feeling financially stressed can cause shame and self-doubt, making any existing young adult mental health issues worse. 

Key Takeaways

• Student loan debt, concerns about the future, and inflation all create financial stress for young adults.
• Financial problems can affect mental health because they produce shame in addition to practical stressors.
• Self-care and concrete strategies can help young adults reduce financial stress and the negative emotions associated with it.
• Stress about money can also be a symptom of mental health issues, like anxiety or depression, that require treatment.

Why Is Young Adult Financial Stress So Common?

Young adults have lots of reasons to feel financial stress. One obvious culprit is global inflation. A Deloitte Global 2023 Gen Z and Millennial survey of 14,483 young adults across 44 countries found that 46 percent of Gen Zs and 39 percent of Millennials feel stressed or anxious all or most of the time. And the cost of living is at the top of their list of concerns.

Here are the top financial stressors that impact young adult mental health:

How Do Money Problems Affect Mental Health?

Research verifies the connection between money problems and poor mental health. One study found that financial worries were significantly associated with greater psychological distress. In a recent Harvard report, more than half of young adults (56 percent) said financial stress was negatively affecting their mental health Some young people can’t afford health insurance. Others struggle to pay rent each month. And some are unable to keep up with their friends’ activities and lifestyles.

When money problems interfere with daily life, managing day-to-day responsibilities is challenging due to heightened anxiety. Money and depression can also be linked: Lack of funds can create a negative work-life balance, or leave young people feeling isolated and lonely.

Financial problems also carry a stigma. Too often, society views financial instability as a personal issue rather than a systemic problem. Shame is a common consequence. Young people may be ashamed that they don’t have enough money to socialize with friends. And they may feel judged as irresponsible, lazy, and even less intelligent for having financial problems, which leads to lower self-esteem. An overview of research found that shame associated with negative self-esteem can play a central role in mental health problems.

Signs That Financial Stress is Affecting Your Mental Health

Financial stress can take a toll on young adult mental and physical health, as the body reacts to ongoing stress. Financial fears can lead to negative mental health side effects, such as: 

• Reduced self-worth
• Anxiety 
• Depression
• Mood swings
• Trouble sleeping
• Constantly overthinking your spending and choices around money
• Comparing yourself to others who have more money or don’t worry about money
• Relationship problems
• Toxic productivity
• Social withdrawal
• Problem substance use
• Suicidal thoughts

Moreover, unhealthy coping behaviors like drinking, gambling, excessive video gaming, and compulsive shopping can lead to additional spending, making the problem worse.

10 Ways to Manage Financial Stress and Enhance Financial Wellness

Financial stress can make it difficult to complete basic tasks at home or work. Learning how to cope with your financial worries reduces stress by helping you feel more in control of your life. Young adults can lower financial stress and increase financial stability by incorporating these tips:

1. Get Enough Sleep

Fatigue increases the likelihood that you’ll ruminate and struggle with obsessive thoughts. Keep to a consistent sleep schedule. Refrain from screen time an hour before bed. And avoid caffeine, large meals, and alcohol four to six hours before sleep to ensure higher-quality rest.

2. Move

To lower stress, boost energy, and improve mood, get a little exercise most days. Strength training is great a few days a week, but you can also take a brisk walk, ride a bike, or swim laps to push your heart rate up and your stress down.

3. Take Relaxation Breaks

To give your mind a break from money stress, take some time each day to relax intentionally. Engage in some deep breathing exercises, meditate, practice yoga, do self-massage, or simply visualize yourself in your favorite peaceful place. 

4. Identify Your Spending Triggers

Take stock of the situations that cause you to spend money unnecessarily. Do you engage in impulse buying when you’re bored? Start online shopping after a frustrating day at work? Head to the mall after a fight with a loved one? To avoid retail therapy, get clear on your spending habits. Make a rule that you’ll wait a week before making a new purchase.

5. Reach Out for Support

Because financial problems carry a stigma, many people feel uncomfortable talking about them. They’re ashamed they struggle to manage money, pay bills, or wipe out debt. Keeping your feelings inside, though, only makes the problem worse. Talk with a trusted friend or family member. It can put your concerns in perspective or provide ideas you hadn’t thought of. Attend a support group for people dealing with financial stress. It’ll show you you’re not alone. 

6. Track Your Spending

When you have money problems, you may avoid dealing with them to keep stress at bay. In the long run, though, you’re only compounding the problem. To develop greater financial wellness, get a handle on your spending. Write down everything you earn and spend money on over the course of a month, including the amount you pay to clear debts. Being able to see it in black and white is the first step in regaining control of your finances.

7. Keep to a Budget

For a week or a month, try spending only on necessities. It’s not easy, but cutting down on nonessential spending can free up extra cash to pay bills. If you still can’t pay bills in full each cycle, call your bank, utility company, or credit card company and explain your situation. They can often arrange a payment plan that works for you.

8. Practice Gratitude 

Worrying about your financial situation directs your attention to your problem, creating more stress. Denying reality isn’t the answer, but staying focused on the negative doesn’t produce financial wellness, either. To reduce stress, shift your attention to what you do have. Either in writing or aloud, express gratitude for what’s good in your life. It may be your health, family, close friends, or a beloved pet. Feeling gratitude gives your mind a welcome worry break.

9. Work with a Finance Professional

If you suspect you won’t be able to improve your financial situation on your own, look for a finance professional who can help you create a budget, manage your debt, develop a savings plan, or communicate with creditors. Many organizations offer free financial advice. Alternatively, you can work with a fee-based financial adviser who can develop a financial plan tailored to your needs.

10. Address Underlying Mental Health Issues

Work with a mental health professional if financial stress makes you unable to function—or if you’re dealing with underlying mental health conditions. For example, an anxiety disorder can magnify money worries so they seem much bigger and scarier than they really are. Or you may be projecting your stress about other life choices, like your career path or relationships, onto your finances. A mental health professional can help you sort through these issues and address what’s really going on.

How Newport Institute Treat Young Adult Depression and Anxiety

At Newport Institute, we understand the current economic climate can create financial stress for just about anyone. And we know that mental and financial health are sometimes linked. Our approach to treatment addresses the maladaptive behaviors catalyzed by stress, as well as the underlying issues, like childhood trauma and mental health disorders.

In our residential programs, our expert team of clinicians, medical experts, and experiential therapists helps young people form supportive relationships with peers and mentors, gain self-knowledge, and develop practical life skills to address their financial issues head on. As a result, they build greater self-worth and cultivate hope. 

Contact us today to find out more about our specialized programming for ages 18–35.

Frequently Asked Questions