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Understanding the connection between finances and mental health to improve customers’ financial wellbeing

Money matters, for real

There is a well-established bidirectional link between financial wellbeing and mental health. Our financial situation influences our mood, and our mood influences the financial decisions we make. These effects can be dramatic. Research has observed that amongst people with unsecured debt there is a three times higher likelihood that a person will suffer from mental disorders such as depression or anxiety disorder1, and it is linked to a significant increase in the risk of suicide2

Financial stress negatively impacts our health

Even in less severe cases, there is still a strong link between our mental, physical and financial wellbeing. Personal finances are a common source of stress and worry. In fact, surveys report that it is one of the most common sources of worry, with 70% of Millennials reporting that money and finances are a major source of their stress3. Chronic stress is damaging to both mental and physical health. It increases the risk of high blood pressure, stomach issues, insomnia, depression and anxiety to mention a few4

Financial stress impairs our decision making

This is also troubling as science suggests that high levels of stress and anxiety are linked to worse decision-making capacity due to impaired cognitive functioning. When we experience high levels of stress our brain tends to focus on what it sees as the most important factor for survival. This means that our normal tendency to focus on what lies ahead of us at this very moment is strengthened even further. When stressed, our ability to think rationally and plan ahead suffers significantly, and we are more likely to go for the easiest option that is offered to us. This rarely means saving money and building stable finances, but rather the opposite. Therefore, experiencing financial stress becomes an obstacle that hinders us from making good financial decisions. This then can clearly form a vicious cycle where mental, physical and financial health suffers unless the cycle is broken. 

Experiencing failure leads to low self-esteem that inhibits taking action

Furthermore, people experiencing financial problems and associated stress often perceive this as a personal failure. This, in turn, gives rise to feelings of shame and hopelessness leading to low financial self-efficacy, and confidence in our own ability to influence our finances. Such a state often results in procrastination, i.e. we avoid taking the action or gathering the information we know would help us. 

In fact, financial self-efficacy is one of the strongest predictors of financial behaviour. Therefore, banks need to make sure that they strengthen the financial self-efficacy of their customers. This concerns both how we give feedback to customers in our products and the way we communicate with them. The feedback we give should help customers see their own progress and create a sense of empowerment that the actions they take today have a tangible impact on their finances going forward. Similarly, the way we communicate with customers needs to help them identify with us and our products and to build their confidence to believe that they can succeed in building financial wellbeing. 

Reducing cognitive load is crucial 

It is important to consider the weakened cognitive capacity associated with financial stress and anxiety when building our user experiences. With a weakened cognitive capacity, the process of digesting new and often complicated information is much more difficult. Therefore, we need to reduce the cognitive load required for using our products, so customers, regardless of their cognitive capacity, can understand and enjoy them. 

Important to note that the link between financial wellbeing and behaviour is equally important. How one feels about their finances, and how one acts is only partially related to one’s income. In fact, in our own research, we see that 34% of high-income customers report low financial wellbeing. Even if they have a monthly income above average, they still feel stressed about their current and future financial situation. 

Dreams Technology effectively boosts financial wellbeing

After just two months of using the Dreams service, 30% of customers reported increased financial self-efficacy and 59% reported increased financial wellbeing, i.e. they felt more secure and less anxious regarding their current and future finances. Alongside these improvements, we also saw changes in behaviour. Customers reported that they have reduced impulse shopping, and increased long-term savings. 

An increase in financial wellbeing is linked to lasting behavioural change and an increase in financial health

At Dreams Technology, we have collaborated with researchers from Linköping University to study how our services influence our customers’ financial wellbeing. We set up a study where we measured financial behaviour and wellbeing when a customer had just started using the Dreams experience and then again two months after to detect any difference. As a part of our study, we followed the behaviour of these customers for two more years and we found that the link between improvements in financial wellbeing and financial behaviour was sustained. The group of customers who showed the largest increase in financial wellbeing after two months also increased their savings. In fact, after two years they saved 31% more than other customers. 

Dreams Technology improves customers’ overall wellbeing and health by boosting users’ financial wellbeing, 

To conclude, our financial wellbeing influences and is influenced by our emotions and mental wellbeing. To truly help customers build financial wellbeing we need to apply this knowledge when we design our products.  

At Dreams Technology, we counteract the negative emotions by building financial self-efficacy and by rewarding healthy financial decisions. This helps build financial wellbeing amongst our end users and puts them in an optimal position to grow further, moving from creating a savings habit to paying off their expensive consumer credits and investing money for the first time. It’s truly a win-win situation, where the financial wellbeing of your customers will help promote their overall health and wellbeing, and help you drive revenue by opening up for up-sell and cross-sell and by creating long-lasting loyal customer relationships. 

Want to explore how we can help you to enhance your existing digital application to truly engage with your customers and improve their financial wellbeing? Book an exploratory meeting with us!


1 Howard et al., 2012, The relationship between personal debt and specific common mental disorders, European Journal of Public Health. 23:1, 108-113. 

2 Richardson et al., 2013. The relationship between mental and physical health: A systematic review and meta-analysis. Clinical Psychology Review, 33:8, 1148 -1162

3 The Future of Money, White Paper by Cognizant Digital Business & Red Associates, 2017

4 Adam et al. 2017 Diurnal cortisol slopes and mental and physical health outcomes: A systematic review and meta-analysis, Psychoneuroendocrinology, 83, 25-41  

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