The recent Federal Reserve Open Market Committee (FOMC) meeting on Nov. 1, 2023, confirmed speculation that the long trajectory of persistent interest rate hikes would be paused. The Fed’s actions mean to curb inflation, which has strained consumers directly impacted by the rising costs of goods and services. Policymakers may have taken notice. But the approach of some teachers and school districts has received less attention.
A changing economy has fostered a renewed interest in teaching financial literacy to high school students to help them prepare for futures as earners, savers, investors, and consumers. Earlier this month, Massachusetts lawmakers proposed a bill mandating high school financial education with the purpose of “understanding the important role that money plays in our lives and knowing how to balance income, spending, debt, and credit.” The promotion of such legislation has focused on an unmet need to reach disadvantaged populations with insufficient opportunity to learn key aspects of financial literacy through generational knowledge from older relatives. But the impact on mental health in this discourse has been under-recognized.
Personal financial well-being is intimately tied to mental well-being. Fluctuations in creditworthiness, an essential characteristic of any individual financial profile, have significant impacts on mental health. A 2021 study in the Journal of Accounting and Finance revealed correlations between decreases in creditworthiness and poor mental health outcomes. With no credit or less-than-excellent credit scores, negative financial circumstances often persist, which may exacerbate underlying mental duress and increase socioeconomic disparity. Disadvantaged individuals may resort to payday loans as a temporary income stream or “quick cash.” High interest rates and penalties associated with payday loans can further aggravate economic stress, perpetuating a traumatic financial cycle for vulnerable groups. Recent investigations correlate restrictions on payday loans with a decline in suicide rates.
Changes to other economic variables such as interest rates can also influence mental health. The Fed’s track record of increasing interest rates to dampen inflation is understandable, but also has the effect of decreasing the availability of credit. Decreases in the opportunity to acquire credit can have negative effects on mental health. An analysis of the effects of several macroeconomic variables in Mexico and other Central American countries showed that monetary and credit contraction—operationalized as rising loan interest rates—was associated with an increased likelihood of depression and completion of suicide. A key ingredient in this relationship is hopelessness, which is often the bedrock of depressive and suicidal mindsets. Individuals who feel financially strapped without a plan or ability to improve their financial situation may suffer from greater depressive symptoms, increasing the risk of suicide.
Although rising interest rates meant to hold prices in check are associated with increased rates of suicide, inflationary pressure, itself, has a similar impact. A 2021 analysis of economic data across 35 countries in the Lancet calculated a 0.088% increase in suicide rates for every 1% increase in inflation.
The nonprofit Council on Economic Education estimates that 30 states now have legislation mandating personal financial education in U.S. high schools. Concerns among educators that the math skills of students declined during the COVID-19 pandemic have found new expression through the rebranding of traditional mathematics curricula with content including personal budgeting, entrepreneurship, and mortgage rate calculations, among others. More widespread efforts to educate youth on the pillars of financial literacy benefit not only the U.S. economy but also the mental health of emerging young adults as they begin their entry into the workforce.
Without doubt, financial stress is not the only contributor to suicidality. A multitude of risk factors—mental health history, access to firearms, family history of mental illness, and many others—contribute to the likelihood of a completed suicidal act. But neglecting the influence of one’s economic climate is a misstep that cannot be afforded. Durkheim theorized over a century ago that disturbances in social equilibrium—like those produced by industrial crises or global recession—can precipitate anomic suicides, and this notion may be just as salient today as in his time.
The provision of a personal financial education in public schools is now a necessity. Economies are dynamic and changes in market conditions in adult life prompt changes in one’s mental well-being. Existing state mandates regarding personal finance education are welcome, but more momentum is needed to ensure the health of the economy and the mental health of America’s young people in this regard.