Partners
Montana State University, IZA and University of Wisconsin-Madison
Summary
From the author’s Executive Summary: “Adverse health conditions have the potential to financially cripple American households. This report reviews the large literature that considers the ways in which health—both physical and mental—impacts household finances. The review largely includes studies conducted with U.S. populations, and it spans many academic disciplines: economics, public health, law, medicine, psychology, public policy, and sociology.”
Overview
Project Duration: One Year
Mental, Physical and Financial Health are Interconnected
In this ICMM-funded review, Carly Urban synthesizes evidence across economics, public health, and policy to examine how physical and mental health shape financial well-being in the U.S. The findings are clear: health shocks—whether sudden injuries or ongoing conditions—can destabilize household finances, often triggering a cascade of economic strain.
Unexpected medical expenses quickly deplete savings, while illness can reduce earnings by forcing individuals out of the workforce. These pressures are interconnected—financial strain can, in turn, worsen health, creating a reinforcing cycle. Mental health challenges, in particular, are often associated with even more severe financial consequences than physical conditions.
[Perhaps unsurprisingly,] the burden is not evenly distributed. Households with fewer assets, limited insurance coverage, and lower levels of education face the greatest risks, though even high earners can experience substantial labor market disruptions.
The review also highlights solutions. Policies such as comprehensive health insurance, paid sick leave, and caregiving support can significantly buffer financial harm. Additional strategies—like pausing loan obligations, improving financial literacy, and increasing transparency around healthcare costs—offer promising, actionable pathways to strengthen financial resilience.
Research Area
What is the relationship between physical, mental, and financial health?
Literature review on the effect of physical and mental health on financial well-being
Swensen, Isaac D.; Urban, Carly (2023), “Literature review on the effect of physical and mental health on financial well-being”, IZA Policy Paper, No. 198, Institute of Labor Economics (IZA), Bonn
