Why getting financially savvy can help your mental health

September 27, 2021

September 27, 2021

Money is a major cause of stress for New Zealanders, and it’s affecting our mental health.

Almost 70% of Kiwis report being concerned about money. And for 18-34 year-olds, that increases to 82%.

Money-related stress is linked to anxiety, depression and sleeplessness. When we feel depressed or anxious, it can be harder to make good financial decisions. Over 90% of people with mental health issues say they spend more than usual and find it difficult to make financial decisions while unwell. This creates a vicious cycle where money stress fuels mental health issues which in turn makes our financial situation worse, increasing our money stress!

This can lock you into a spiral of poor financial and mental health, each contributing to the other. The stigma some feel about their financial situation means they don’t reach out to others, creating isolation and more stress.

A survey of New Zealanders from June of last year - post lockdown - found that those who were struggling financially were:

  • 7 times more likely to be unhappy
  • Twice as likely to be stressed, and
  • 6 times more likely to have poor wellbeing.

We don’t want to see anyone’s mental health suffer because of financial woes. We are here to help you do something about it!

We have identified three top areas that contribute to financial stress, so you can take steps to lower your stress and enhance your mental health.

1 - My Partner and I Disagree

When it comes to relationships, money is a significant topic. While it’s bad enough that 1 in 5 Kiwis report relationship issues due to money, the rate increases to 1 in 4 among 18-34 year-olds. And it doesn’t matter how much money you have - rates are similar among those with little to no income compared to those making over $150,000 a year.

These issues too often lead to the relationship ending. Studies show that the three strongest predictors of divorce are infidelity, alcohol or drug abuse, and disapproval of how your partner spends money. Financial disagreements are more strongly linked to divorce than any other type of disagreement.

These studies showed that couples’ financial problems correlated to a lack of long-term planning, spending more than saving, and not wanting to talk about money. Money arguments tend to come up in the heat of the moment without resolving underlying issues, making it a quick trigger for anger, frustration, and stress.

Save your relationship some stress by agreeing to sit down and discuss your finances. Together, you can make a plan to pay off your debts or set up a savings plan. Come to an agreement about how you will make major purchases together. And talk to a financial adviser to help you set and meet your financial goals as a couple.

2 - I Want It Now

Kiwis carry a lot of debt. We rank in the bottom half of OECD countries for household debt as a percentage of household income - our debts are a shocking 164% of our income.

The most common debt in New Zealand is credit card debt.

  • 17% of New Zealanders say credit card bills are their leading cause of financial stress.
  • 16% say they do not repay their balance in full because they regularly give in to impulse buying.

Instant gratification is a short term answer that creates long-term problems. You’ll pay a lot more in the long term for that thing you couldn’t live without due to the high interest rates of most credit cards. 1 in 3 Kiwis don’t pay off their credit cards every month, racking up interest and fees month after month.

These days, it’s not just credit cards. It turns out Kiwis love Buy Now Pay Later (BNPL) schemes, which account for 19% of our debt. BNPL schemes are programs like Laybuy and Afterpay which appear to be free up front, but can be costly if you miss payments.

A new Consumer NZ survey found that Kiwis are paying $10 million a year in late fees to BNPL schemes. The survey reported that 40% of consumers use BNPL services, and of these 14% paid late fees. Over half said they bought things they would not normally have purchased because they had access to easy credit.

When signing on to these schemes, most people ignore the fees because they expect to make the payments. But unexpected things happen, impacting our ability to pay back what was essentially borrowed from the BNPL lender, and you’ll pay extra for it.

Money spent for short-term happiness would be better put to growing long-term investments. You don’t need a lot to start investing. If you’re signed up to KiwiSaver, you’ve already started!

3 - I Will Never Have Enough for Retirement

Anxiety about retirement includes worrying about running out of money, having increased health care costs, retiring with debt, supporting adult children, or not knowing how to handle finances if the spouse who usually does it passes away.

In New Zealand, over 60% of people fear not having enough money in retirement - it is the number one biggest cause of ongoing financial stress. Even more alarming is that 1 in 3 women expect that they will have “not nearly enough” for retirement.

The stress of looking at a bleak retirement is not good for our mental health. Research shows that whether we focus on worrying about it or try to avoid thinking about it, we experience elevated stress levels. Getting closer to retirement age you may feel that you will lose your independence and control over your own affairs if you cannot be financially independent. On the other hand, denying that there is a problem suppresses the stress and still results in a decrease in well-being.

The good news is, it’s easy to take steps to set yourself up for retirement.

Making a plan is key. What do you envision your retired years looking like? How long do you have to save? Once you have your sights set on your goals, you can figure out how much you need to be saving to get there.

You can be set up in the right KiwiSaver fund in just five minutes. We have done all the research for you and created our Fund Finder quiz to match you to a KiwiSaver fund. Once you choose a fund and set your contribution rate, it’s time to watch your balance grow.

Sort Your KiwiSaver for Your Mental Health

Money doesn’t have to cause mental health stress. Take a few steps to get your finances in order. Pick just one area to start with, like your KiwiSaver account. The earlier you start saving, the more you will have later on. You’ll feel much better for having made positive steps to break the money stress cycle.

It’s always a good idea to talk to a financial adviser to help you set financial goals and help keep you on track. Our financial experts at BetterSaver are here to answer your questions - just send us a message.

If you’re feeling overwhelmed and need someone to talk to, go to https://depression.org.nz or text 1737.

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