Mental health is a widespread concern that affects individuals beyond their personal lives into every aspect of work and financial stability. As financial stress is one of the major contributors to mental health issues, it is essential to recognize the significance of emergency savings in maintaining personal mental health stability.
In this article, we will discuss the link between mental health and emergency savings, and how individuals may be able to maintain their financial stability by prioritizing their mental health.
The Importance of Emergency Savings
Emergency savings are an essential component of personal finance. They provide a buffer against unexpected events such as job loss, medical emergencies, or unexpected expenses.
The pandemic made it exceptionally clear that unforeseen situations can arise at any moment; in many cases, without notice, and may significantly impact individuals’ mental health. For example, the uncertainty that comes along with losing a job or facing a medical emergency could generate significant stress. Having emergency savings in these situations may make all the difference between heavy financial stress and better mental health.
Studies Conducted on Mental Health and Emergency Savings
Financial stress could lead to mental health issues such as depression, anxiety, and even suicidal thoughts. A survey conducted by the American Psychological Association (APA) reveals that 66% of Americans experience financial stress, the highest number of people experiencing money-related stress since 2015. Financial stress may cause sleeplessness, affect productivity levels, and even harm relationships.
Another study conducted by the National Endowment for Financial Education revealed that individuals with emergency savings have better mental health than those without any savings. The study showed that people who lose their income unexpectedly are four times more likely to experience depression than those who have an emergency savings account. This study indicates that there is, indeed, a link between mental health and emergency savings, and having emergency savings could reduce financial stress, ultimately benefiting individuals’ mental and emotional states.
Why Having Emergency Savings Improves Mental Health
Having an emergency savings account may significantly reduce financial stress, leading to an improvement in mental health. Emergency savings act as a cushion between individuals and any unforeseen circumstance that may cause them financial pressure. Having an emergency savings fund provides security, ensuring that individuals may be able to support themselves and their families even during a challenging time.
Emergency savings also provide a sense of control, making it easier for individuals to manage anxiety that may arise due to the uncertainty of future events. Knowing that they have a financial buffer may give individuals the confidence to handle unexpected situations with poise and better mental clarity.
How to Build an Emergency Savings Fund
1. Prioritize Mental Health
Individuals should prioritize their mental health. This could involve taking necessary steps to help maintain good mental health, such as engaging in regular exercise, meditation, and seeking therapy or counseling when necessary.
Many high-net-worth individuals might overlook the importance of prioritizing their mental health, often due to work-related stress or pressure, but failing to recognize the importance of this could contribute to increasing their risk of developing mental health concerns.
2. Budget for Mental Health Care
Budgeting for mental health care may also help individuals avoid unnecessary financial strain. High-net-worth individuals should ensure that they have adequate savings to cover the cost of mental health care. This may be achieved by creating a separate emergency fund for mental health care expenses, setting aside a portion of one’s income each month into a mental health care fund, or extending insurance coverage to cover mental health-related expenses.
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At Kreitler Financial, we work with clients who share a common goal of long-term success, building strong and lasting relationships.
Contact us today to start your journey towards financial security and mental well-being.