Financial stress and mental health | Thoughts from our expert

By: Eveline Keable
Product Manager, Health, Wellness and Disability
Group Benefits and Retirement Solutions
iA Financial Group

In their detailed annual survey, Benefits Canada included questions for the first time about plan members’:

• Social health: their ability to maintain healthy relationships, the quality of relationships, and ability to adapt to social situations
• Workplace health: the quality of their work environment and its impact on wellbeing
• Financial health
• Work-life balance

The survey paints a sweeping portrait of how these factors affect overall health, allowing us to draw key conclusions about financial and mental health.

One finding that caught our attention is the increase in daily stress levels compared to the 2023 survey. Stress levels have risen to 57% among people with poor mental health and 52% among people with poor financial health. In this article, we focus primarily on the relationship between financial stress and mental health.

Growing financial pressure

Although economic conditions seemed to improve in 2024, mainly due to slowing inflation and falling interest rates, group insurance plan members have continued to tighten their belts.

Personal costs, such as out-of-pocket costs not covered by benefit plans, co-insurance, drug deductibles, and expenses exceeding their healthcare coverage, are the main barriers identified by people with poor mental health (58%) and people with poor overall health (44%).

When asked about chronic conditions or major injuries, personal cost was one of the key factors hindering people’s ability to continue treatment for their health conditions. In fact, 42% of people cite personal cost as the main obstacle.

When health benefits run out for a treatment or service, nearly one third (27%) of people will stop treatment until coverage resumes. Moreover, 23% of respondents pay for treatment themselves, sometimes cutting back on the number of treatments, while one in five people who take at least one medication will skip doses to save money. And most alarmingly, when coverage ends, 14% of people say they stop treatment altogether.

Containing financial stress

These findings highlight the critical role that financial health plays when aiming for people’s overall wellbeing. When they are forced to cut back on their medication to save money, their physical health can deteriorate, which in turn can impact their mental health. This provokes a vicious cycle that affects total wellbeing.

As a result, we recommend that plan sponsors consider the impacts of financial insecurity on plan members. Financial challenges such as daily spending on basic needs, debt, and growing barriers to home ownership can lead to chronic stress and mental health problems, such as anxiety and depression.

The impact of financial stress on mental health

For many plan members, their personal financial situation is their main source of stress, with the rate climbing from 35% in 2022 to 43% in 2024.

The percentage of individuals experiencing high or extreme stress in the three months prior to the survey has risen steeply in the past four years, from 27% in 2022 to 36% in 2024.

Furthermore, over a fifth of respondents, or 22%, reported having a diagnosed mental health condition, such as depression or anxiety.

We should keep in mind that mental health issues, including those triggered by financial stress, can lead to problems such as changes in appetite and sleep disorders, which in turn can affect concentration. This often results in decreased productivity at work and negative impacts on interpersonal relationships, self-confidence and self-esteem.

And let’s not forget that factors beyond a person’s control also contribute to high levels of stress.

The role of plan sponsors

These findings underscore the critical role plan sponsors can play by making sure financial health is included in their health investment strategies.

Retirement savings programs alone are not enough to ease the high levels of financial stress plan members are experiencing. We recommend that employers set up employee education programs to improve financial literacy, as access to resources and education about personal finances can have very positive outcomes.

It’s also important to be aware of the impact that small steps can have. When employees are able simply to understand and manage a personal budget, they feel more in control and are able to reap the benefits.

Plan sponsors can offer tools, for instance, to help employees understand their retirement savings options and mortgage payments, giving them the means to plan a financial strategy that suits their specific needs. This also gives employers the opportunity to direct plan members to financial resources and specialists if needed.

We have in fact observed that employers are increasingly aware that a holistic approach to wellbeing should include financial health, and many are keen to consider innovative options. We firmly believe that employee benefit plans, combined with group retirement savings programs, can play a significant role in reducing financial stress.

Taking it further

In our view, the survey effectively shows how the four dimensions of overall health are interconnected and difficult to separate.

• Poor physical health, whether short-term or chronic, can undermine mental and social health.
• Poor physical or mental health can lead to financial hardship, which can take the form of reduced income while on disability or higher medical expenses.
• Financial stress, when combined with mental and social health issues, can result in lifestyle choices that affect physical health.
• Social health also plays an important role in overall health: support from family and friends has a positive impact on physical, social and mental health.

We deem essential to remember that when a person’s financial situation is precarious, they will often cut back spending on leisure activities and nonessential care. This makes it harder for them to focus on exercise and healthy eating, which it makes more challenging to take steps to improve their health. In the end, this can lead to increased costs for the person, the employer, and sometimes even the community.

We believe that initiatives focused on improving employee education, reducing financial insecurity and providing more resources are likely to have a positive impact on employee financial, mental and physical health, ultimately improving overall wellbeing.