Health is wealth: How finances can affect well-being
Dr. James Aw, Chief Medical Officer, OMERS
February 24, 2025
As the new year heads into its third month, it's time to not only focus on our physical and mental health but also check in on our financial well-being.
A recent study reported that millennials (aged 29-44) now carry the most debt (38% in Canada) as they try to buy homes, raise a family and pay bills and loans. Generation Z (aged 13 to 28) is also expected to take on more debt, delay purchasing a home and rent longer. In addition, fewer parents believe their children will be better off financially than them (16% in Canada and Japan, 14% in France).
What does this have to do with well-being?
Another study shows that the ability to effectively manage your financial health (how you spend, save, borrow and plan financially) has a direct impact on overall health.
The World Health Organization recognizes that lower socioeconomic status (income, wealth, education) has a negative impact on health outcomes and studies have found that ongoing stress around finances is linked to poor mental and physical health. Studieshave also shown that a negative “wealth shock” (sudden loss of wealth) during middle or older age is an increased risk factor for cognitive decline and dementia, mortality rates and psychosocial stress.
How can you get better at managing your financial health?
Nature.com published an interesting piece that looks at how from a holistic well-being point of view, planning and saving is good for your mental and physical health. In it, they discuss starting by asking yourself the following questions:
Am I able to meet my normal monthly living expenses without any difficulty?
Do I have sufficient savings that could cover six months of expenses?
Do my financial circumstances give me freedom to pursue my goals?
Given my age, have I done adequate financial planning for the future?
Some may then move from this state to actually creating a financial health plan to build long-term financial flexibility and security. The beginning of the journey for younger generations may be to improve financial literacy. For mid-career individuals, the focus may be more on living within your means and being thoughtful about spending and borrowing. For late-career individuals, it could be more about planning for independence and financial freedom to enjoy life.
For every generation, this also includes factoring in unexpected life surprises and economic volatility such as health, financial market and income changes alongside your current spending and aspirations for the future. Pension plans are a nice example of a social infrastructure linked to positive health, as explained by the National Institute on Ageing.
It’s never too late to start exercising your financial well-being muscles to improve your psychological and physical health for the short and long term!
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